South Korea to Introduce Blockchain-Based Deposit Tokens for Public Expenditure 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 deposit tokens for government expenditures, as part of a broader 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 for Treasury fund expenditures. The approved pilot will enable the use of tokenized deposits 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 mandated the use of card-based payments. Within the sandbox environment, government agencies will be able to operate outside the existing rules on a limited basis to test new methods. Officials anticipate that the new system will enhance oversight, as token-based payments can be programmed with predefined conditions such as spending limits and industry-specific usage. This is expected to reduce the need for manual audits, particularly when spending occurs outside regular hours. Additionally, the system will eliminate intermediaries such as card networks, which could lead to lower transaction fees for small businesses receiving government payments. This is the second instance of deposit tokens being used in Treasury operations, following an earlier pilot related to subsidies for electric vehicle-charging infrastructure. The trial will be conducted in Sejong City after a selection process for participating firms, and the ministry plans to expand the program if it demonstrates improved control over spending and significant cost savings.