South Korea launches deposit token pilot! Aiming to fully replace government-issued credit cards, and also help merchants save on transaction fees.

South Korea plans to launch a deposit token pilot in Sejong City in 2026, using blockchain technology to replace credit cards in the public administration system. The move aims to strengthen fund oversight through programmable features and reduce merchant transaction fees.

South Korea launches a deposit token pilot, targeting a full transformation in 2026

The South Korean government is actively pushing for the digital transformation of the national fiscal system. The Ministry of Economy and Finance of South Korea (MOEF) recently announced that it will officially launch a blockchain technology pilot program, adopting “Tokenized Deposits” to pay for the daily operating expenses of government agencies.

The program is expected to be implemented first in the fourth quarter of 2026 in Sejong City, the administrative capital, with the goal of fully replacing the credit card and signature card systems currently commonly used in the public administration system. This plan has been included in the 2026 Regulatory Sandbox project, where the government temporarily waives existing payment regulations to test the potential of distributed ledger technology (DLT) in public financial infrastructure in a controlled environment.

The South Korean government has already accumulated relevant technical experience. For example, in March this year, it collaborated with the Ministry of Environment and the Bank of Korea to conduct a deposit token trial for electric vehicle charging subsidies. This pilot will expand to cover the government’s day-to-day administrative spending. This symbolizes that South Korea is moving from single-purpose subsidy disbursement to a comprehensive digital fiscal management industry.

The Ministry of Economy and Finance stated that choosing Sejong City as the starting point is because the city’s special status as an administrative center will help collect usage data from various ministries and lay a solid foundation for later nationwide promotion.

Programmable features strengthen oversight, eliminate audit blind spots, and ease burdens on small merchants

The execution of current public funds relies heavily on procurement cards issued by the state, and it adopts an audit model that submits reports after transactions. The Ministry of Economy and Finance pointed out that, in traditional processes, handling expenses late at night or on non-working days often creates additional administrative burdens and makes audits more difficult. Deposit tokens have “programmable” features, allowing the competent authority to set funding-use parameters in advance—for example, restricting spending to office hours or specifying limits to certain industry categories such as transportation and office supplies. This mechanism can prevent misuse of public funds at the source, significantly improve transparency in government spending, and effectively reduce the complexity of subsequent manual audits.

In addition to improving internal management efficiency, the system also has a positive impact on the private business environment. The decentralized settlement structure removes the participation of traditional international card networks such as Visa or Mastercard. This means that the transaction fees that participating merchants originally had to pay—about 10% to 30% per 1,000—will be substantially reduced.

The Ministry of Economy and Finance emphasized that this no-middlemen payment architecture can directly reduce operating pressure on small businesses and merchants working with the government, achieving a win-win for public finance and local economies. In the future, the government plans to integrate this automated reporting and payment mechanism into more public service scenarios.

The central bank and commercial banks team up to build a digital currency ecosystem centered on bank issuance

Technically, deposit tokens are considered the digital representation of bank deposits on the blockchain. They are fundamentally different from ordinary stablecoins. Deposit tokens still constitute bank liabilities and are strictly regulated under the current financial system.

In a written response to the National Assembly, the Bank of Korea governor nominee Shin Hyun-song (신현송) explicitly stated that the central bank digital currency (CBDC) and deposit tokens issued by commercial banks are the “core” of the future digital currency ecosystem. He believes that private virtual assets have limitations in replacing fiat currency, so an official digital asset path built on trust must be established.

Image source: Bloomberg South Korea’s Bank of Korea governor nominee Shin Hyun-song (신현송)

Currently, South Korea’s financial industry has already launched an intense competition for infrastructure:

• KB Financial Group and Shinhan (Shinhan) Financial Group are accelerating the construction of relevant infrastructure. KB Financial has already begun a technical cooperation with Circle to explore diverse application scenarios for a Korean won stablecoin.
• Shinhan and Hana Financial are also discussing cooperation with Samsung Electronics, integrating related payment functions into the Samsung Pay platform.

The active participation of these private financial institutions reflects the market’s high level of attention to the government’s push for digital transformation policies. Under the plan, the banking side will be responsible for issuing deposit tokens, while the final settlement will be carried out through the wholesale CBDC issued by the Bank of Korea, forming a stable and efficient digital payment loop.

Regulatory sandbox removes legal obstacles; the Digital Asset Basic Act leads fiscal modernization

The South Korean government has set an ambitious vision to shift one-quarter of the national treasury’s fund execution to digital currency by 2030. To achieve this goal, the government is gradually improving the regulatory environment. In addition to using the Regulatory Sandbox to resolve conflicts in existing laws that mandate the use of physical plastic cards, it is also actively promoting the “Digital Asset Basic Act.” This bill will comprehensively regulate stablecoins, real-world asset tokenization (RWA), and crypto exchange-traded funds (ETFs), providing a clear legal basis for the digital asset industry.

Although the legislative process is affected by changes in the political and economic environment, the relevant ministries and agencies have planned to restart legislative discussions after the June 3 local elections, led by the ruling party. With the Sejong City pilot program underway, the government will continue collecting key data to assess the practical effectiveness of deposit tokens in enhancing fiscal transparency and tracking funds.

If the Sejong City model is validated as successful, it will be expanded nationwide, ushering in a new digital era for government budget management and national fiscal infrastructure. This reform is not only a change in payment methods, but also a comprehensive optimization of the country’s financial governance efficiency.