South Korea to Introduce Blockchain-Based Tokens for Government Expenditures in Q4

The South Korean Ministry of Economy and Finance is set to launch a pilot program in the fourth quarter to test the use of blockchain-based tokens for government spending as part of a larger effort to modernize public fund management. According to local media reports, the ministry has obtained approval for the pilot under the 2026 regulatory sandbox program, which will allow the use of digital currency to disburse Treasury funds. The approved pilot will enable the use of tokenized deposits to pay for business promotion expenses, which are currently processed using government purchasing cards. This move marks a significant shift from the traditional system governed by the Treasury Funds Management Act, which has long required card-based payments. In the sandbox environment, agencies will be able to test new methods outside of these rules on a limited basis. Authorities anticipate that this change will lead to improved oversight, as token-based payments can be programmed with predefined conditions such as spending limits and industry-specific usage restrictions. This could reduce the need for manual audits, particularly when spending occurs outside standard working hours. By removing intermediaries like card networks, the ministry believes that the new system could lower transaction fees for small businesses receiving government payments. This is the second instance of using deposit tokens in Treasury operations, following an earlier pilot related to subsidies for electric vehicle-charging infrastructure. The trial is scheduled to take place in Sejong City after a selection process for participating firms, with plans to expand the program if it demonstrates stronger control over spending and yields measurable cost savings.