South Korea launches pilot for blockchain‑based deposit tokens in government spending

South Korea’s Ministry of Science and ICT has given regulatory approval for a pilot that allows public officials to settle certain government operating expenses with blockchain‑based deposit tokens instead of traditional government purchase cards.

How the pilot works

Participating officials will scan QR codes on their smartphones to pay eligible costs. The payments are made with deposit tokens issued by six commercial banks and settled instantly on the Bank of Korea’s Project Hangang blockchain platform. The tokens can be programmed to block purchases in categories prohibited by government expense rules.

Bank participation and technology

• KB Kookmin Bank
• NH NongHyup Bank
• Shinhan Bank
• Woori Bank
• Industrial Bank of Korea
• Hana Bank

These banks issue the tokens, while the Bank of Korea provides a wholesale central bank digital currency (CBDC) layer for inter‑bank settlement. The two‑layer structure keeps the CBDC at the wholesale level and the deposit tokens at the retail level.

Expected benefits

• Immediate settlement and blockchain‑recorded transaction history, improving verification of government spending.
• Potential reduction in payment fees for small businesses receiving government payments.
• Programmable controls to prevent misuse of funds in restricted categories.

Background and broader rollout

Project Hangang began in April 2025, initially allowing up to 100,000 users to convert bank deposits into tokens for QR‑code payments. A second phase launched in March 2026, expanding to nine banks and adding use cases such as government subsidies, person‑to‑person transfers, biometric approvals, and automatic wallet top‑ups.

The current pilot extends the token system from consumer payments to public‑sector spending, testing a similar instant‑settlement model for merchants that receive government payments.

Regulatory context

The pilot received a sandbox exemption from the ICT Regulatory Sandbox Review Committee on 21 September, allowing the trial to proceed without amending the National Treasury Funds Management Act. The exemption is part of nine projects approved at the meeting.

Future considerations

Bank officials note that broader adoption will require additional anti‑money‑laundering controls, fraud detection, and reporting mechanisms. Ongoing discussions aim to keep deposit tokens operational while expanding infrastructure for commercial use.