South Korea Pilots Bank-Issued Blockchain Tokens

The Ministry of Economy and Finance announced a pilot to use bank-issued blockchain “deposit tokens” in the fourth quarter in Sejong City to pay government ministry expenses. The program will replace plastic government purchase cards for travel and operational costs and aims to limit unauthorized spending and lower payment costs.

Under the 2026 regulatory sandbox approval, commercial banks will issue programmable digital tokens for official business spending. The tokens can be coded to function only during set hours, for example 9 a.m. to 6 p.m., or only at approved merchant categories such as transportation. Programmable rules are intended to block late-night or weekend purchases that currently require follow-up audits.

The pilot follows an earlier trial that used deposit tokens to pay subsidies for electric vehicle charging stations. Officials said the Sejong test will be limited at first and could be expanded nationwide if it performs as expected.

The token system bypasses international card networks such as Visa and Mastercard, removing the merchant commission that typically runs about 1% to 3% on card transactions. The Ministry described the setup as a “settlement structure without intermediaries” and said it should ease fee burdens on small businesses. Officials also noted banks may still apply fees for issuing or handling the tokens.

Commercial banks and fintech firms are building supporting infrastructure. KB Financial Group has formed a partnership to explore a Korean won stablecoin, and Shinhan and Hana Financial Groups have held talks with Samsung Electronics about integrating stablecoin payments into Samsung Pay. Under the pilot, banks will be the issuers, creating a bank-led model for government settlements.

In a written response to the National Assembly, Shin Hyun-song, the nominee for governor of the Bank of Korea, wrote that a central bank digital currency and commercial bank deposit tokens should be the “core” of the country’s digital currency ecosystem. He acknowledged stablecoins can have a role but argued privately issued virtual assets have “fundamental limits” in replacing fiat money and emphasized trust in a currency.

Regulators and banks still need to resolve questions on pricing and governance. The pilot does not yet specify whether banks will levy handling or conversion fees, how disputes and chargebacks will be handled, or how data privacy and technical interoperability with existing payment systems will be managed. Legal rules for embedding spending limits into payments will also require clarification.