South Korea’s Ministry of Economy and Finance (MOEF) has announced that it has selected a pilot project titled Pilot Project for Treasury Fund Execution Based on Blockchain Digital Currency as part of the 2026 targeted regulatory sandbox program.
The initiative will test blockchain-based deposit tokens; digital representations of bank deposits issued on a distributed ledger to handle certain government operational expenses, specifically replacing traditional government procurement and credit cards used for business promotion and official spending.
The pilot is set to launch in Sejong City during the fourth quarter of 2026 (Q4), with potential gradual expansion afterward. Tokens can be designed with built-in restrictions, such as: Preset spending limits, Allowed time periods, Restricted industries or merchants. This programmability aims to boost transparency, minimize misuse or fraud, simplify audits, and lower transaction fees by reducing or eliminating intermediaries in settlements.
This pilot builds on earlier blockchain and digital currency experiments in South Korea’s public finance:In March 2026, the government in coordination with the Bank of Korea advanced Project Hangang (Phase 2), incorporating nine major commercial banks to test deposit tokens for distributing government subsidies, starting with a ~30 billion KRW project for mid-speed electric vehicle (EV) charging infrastructure.
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The government has outlined plans to channel up to 25% of its national budget roughly $499 billion/728 trillion KRW through digital assets and deposit tokens by 2030, beginning with targeted subsidies like those in the EV sector. Deposit tokens differ from a full retail CBDC (central bank digital currency) but are backed by commercial bank deposits and leverage blockchain infrastructure.
They represent one piece of South Korea’s ongoing exploration of programmable money for fiscal efficiency, alongside potential legal amendments to the Bank of Korea Act and National Treasury Act later in 2026. Officials highlight improvements in: Fiscal oversight — Real-time tracking and conditional spending reduce administrative burdens. Faster settlements and lower costs for small businesses and merchants accepting the tokens.
Programmable constraints make it harder to divert funds. This fits into South Korea’s broader push toward digital innovation in public services while maintaining oversight through a regulatory sandbox approach. The project is still in the planning and pilot stage, so outcomes will depend on testing results. It reflects growing global interest in blockchain for government treasury management, focusing here on controlled, deposit-backed tokens rather than volatile cryptocurrencies.
Programmable tokens allow preset rules like spending limits, time windows, permitted industries and merchants. This enables automated compliance instead of after-the-fact manual reviews or justification reports, making it harder to divert or misuse public funds. Real-time tracking on blockchain simplifies audits, reduces paperwork, and eliminates the need for officials to justify certain expenses
Removing intermediaries like card networks in settlements is expected to lower transaction fees for merchants accepting government payments. Faster settlements, programmable money for conditional spending, and better fiscal control. This builds on earlier subsidy pilots and supports the longer-term goal of routing up to 25% of the national budget through digital assets by 2030.
Successful results could lead to permanent legal changes and gradual national expansion beyond operational expenses. Technical integration with existing systems, adoption by government departments and merchants, and ensuring seamless participation from the nine major banks involved. Greater reliance on blockchain and digital infrastructure could introduce new security risks in handling public funds.
While intermediaries are removed, banks issuing the tokens might still charge fees—outcomes will depend on pilot testing. Starts small in Sejong City for specific operational expenses replacing procurement cards; full impacts on the broader ~$499 billion national budget remain to be seen. The pilot aims to modernize public finance by making spending more traceable, controllable, and efficient while testing programmable deposit tokens as a practical bridge between traditional banking and blockchain.