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 government public service system. This is intended to strengthen fund supervision through programmability and reduce merchants’ transaction fees.

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

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

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

Previously, the South Korean government had already accumulated relevant technical experience. For example, this year in March, it collaborated with the Ministry of Environment and the Bank of Korea (Bank of Korea) to conduct a deposit token pilot for electric vehicle charging subsidies. This pilot will expand the scope to the government’s day-to-day administrative expenditures. This symbolizes that South Korea is moving from subsidy disbursement for a single purpose 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 different ministries and provide a solid foundation for subsequent nationwide promotion.

Programmability strengthens supervision, eliminates audit blind spots, and eases burdens on small businesses

The execution of current public funds relies heavily on procurement cards issued by the state, and the audit process follows a post-submission reporting model. The Ministry of Economy and Finance pointed out that in the traditional process, when handling expenditures made late at night or on non-working days, it often creates additional administrative burdens and increases the difficulty of review. Deposit tokens have “programmable” features, allowing the competent authorities to set usage parameters in advance—for example, limiting spending times to office hours or designating that spending is limited to specific industry categories such as transportation or office supplies. This mechanism can prevent misuse of public funds at the source, significantly improve the transparency of 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. A decentralized settlement structure removes the involvement of traditional international card networks such as Visa or Mastercard. This means that the transaction fees that participating merchants previously had to bear—approximately 10/10 to 30/100 of the amount—will be significantly reduced.

The Ministry of Economy and Finance emphasized that this payment architecture without intermediaries can directly reduce operational pressure on small enterprises and merchants cooperating 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 join forces to build a digital currency ecosystem centered on bank-issued deposits

From a technical standpoint, deposit tokens are considered the digital representation of bank deposits on a 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 it is necessary to build an official digital asset pathway based on trust.

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

So far, South Korea’s financial sector has launched intense competition for infrastructure:

• KB Financial Group and Shinhan Financial Group are accelerating the construction of related infrastructure. KB Financial has already begun technical cooperation with Circle to explore diverse application scenarios for Korean won stablecoins.
• Shinhan and Hana Financial are also considering cooperation with Samsung Electronics to integrate related payment functions into the Samsung Pay platform.

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

The 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 treasury 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 related to mandatory use of physical plastic cards, it is also actively promoting the “Digital Asset Basic Act.” This bill will comprehensively regulate stablecoins, tokenization of real-world assets (RWA), and crypto exchange-traded funds (ETFs), providing a clear legal basis for the digital asset industry.

Although the legislative process is influenced by changes in political and economic conditions, relevant ministries and agencies have planned to restart legislative discussions after the June 3 local elections, led by the ruling party. As the pilot program in Sejong City advances, the government will continue to collect key data and evaluate the real effectiveness of deposit tokens in enhancing fiscal transparency and fund tracking.

If the Sejong City model is verified to be successful, it will be promoted nationwide in the future, 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.