South Korea’s Ministry of Economy and Finance will pilot blockchain-based deposit tokens for executing government operational expenses, marking a significant expansion of the country’s digital currency infrastructure into day-to-day public spending.

The ministry announced today that the project was selected as a 2026 regulatory sandbox initiative overseen by the Office for Government Policy Coordination. The pilot targets a full launch in Q4 2026, beginning in the administrative capital of Sejong City.

Under South Korea’s National Treasury Management Act, government operational expenses, such as business promotion costs, must currently be processed through government-issued purchase cards. Transactions made during restricted periods, such as late nights or weekends, require additional post-use justification, creating administrative friction.

The sandbox designation temporarily exempts the pilot from those card-based requirements, allowing deposit tokens to serve as the payment instrument instead. The programmable nature of the tokens enables authorities to preset conditions on spending, including allowable time windows and merchant categories, replacing the current review model with automated, rules-based controls.

Officials said the shift could also reduce transaction fees for small business owners by removing intermediaries from the payment settlement process.

Nine major Korean banks are participating in the experiment, including KB Kookmin, Shinhan, Woori, and Hana. Unlike stablecoins, deposit tokens remain liabilities of the issuing commercial banks and operate within the existing financial system.

The project is the second deposit token-based treasury payment initiative in South Korea, following a March pilot led by the Ministry of Climate, Energy and Environment and the Bank of Korea that used tokenized deposits to distribute 30 billion won ($21.4 million) in subsidies for electric vehicle charging infrastructure.

The move comes as South Korea’s broader digital asset policy has shifted toward a more permissive stance following the election of President Lee Jae Myung, who campaigned on promises to approve spot crypto ETFs and cut exchange fees. Meanwhile, in the private sector, Crypto.com recently partnered with Korea’s largest payment processor, KG Inicis, to enable crypto payments for foreign tourists in the country.

The MOEF said it plans to expand the program’s scope based on operational results and pursue related legal and institutional reforms in parallel.

This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.