South Korea to Introduce Blockchain-Based Deposit Tokens for Government 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 expenditure 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 enable the use of digital currency for Treasury fund expenditure. The approval will allow businesses to utilize tokenized deposits for promotional expenses, which are currently processed using government purchasing cards. This change marks a significant departure from the traditional system governed by the Treasury Funds Management Act, which mandated the use of card-based payments. In the sandbox environment, government agencies will be permitted to operate outside these rules on a limited basis to test novel approaches. Government officials anticipate that this change will enhance oversight, as token-based payments can be programmed with predefined conditions such as spending limits and restrictions on eligible industries. This could lead to a reduction in manual audits, particularly when spending occurs outside standard working hours. The new system also eliminates intermediaries like card networks, which the ministry believes could result in lower transaction fees for small businesses receiving government payments. This initiative marks 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 is scheduled to take place in Sejong City after a selection process for participating firms, as stated in the report. The ministry plans to expand the program if it demonstrates enhanced control over spending and yields measurable cost savings.