South Korea has continued to prioritize blockchain technology, with the Ministry of Economy and Finance announcing a new pilot project just days after the nominee for the central bank governor insisted on a bank-led digital currency model.

The pilot project involves the government officially using blockchain-based “deposit tokens” to pay for government ministry business expenses.

Currently, government officials use state-issued credit or debit cards (government purchase cards) to pay for business trip expenses or operational costs. However, the Ministry of Economy and Finance believes this system is outdated.

The new pilot, approved under the 2026 regulatory sandbox program, will replace these plastic cards with digital tokens issued by commercial banks.

Previously, the Ministry of Finance launched a pilot to pay subsidies for electric vehicle charging stations using deposit tokens.

The new pilot will begin in the fourth quarter of this year, starting in the administrative capital, Sejong City. If successful, it will expand nationwide.

Unlike credit cards, these deposit tokens are “programmable.” The government can code the tokens to work only during specific hours, such as 9 AM to 6 PM, or only in specific industries, such as transportation. This feature is aimed at stopping the misuse of public funds and reducing the need for audits, which are currently required for late-night or weekend spending.

The system also removes financial intermediaries like Visa or Mastercard networks, eliminating the need for business owners to pay a commission fee (usually 1-3%) to the card company if a credit card is used for payment.

The Ministry of Economy and Finance stated that this “settlement structure without intermediaries” will alleviate the fee burden on small business owners. However, the pilot is still in the early stages, and it remains to be seen if commercial banks will charge different fees for handling these tokens.

Shin Hyun-song, the nominee for the Governor of the Bank of Korea (BOK), in a written response to the National Assembly, stated that a central bank digital currency (CBDC) and commercial bank deposit tokens should be the “core” of the digital currency ecosystem.

Shin Hyun-song acknowledged that stablecoins have a role in the economy, but he considers deposit tokens and government CBDCs a higher priority. He emphasized that trust in the currency is the most important factor, arguing that privately issued virtual assets have “fundamental limits” in replacing fiat money.

While the Bank of Korea remains cautious about crypto volatility, commercial banks like KB Financial Group (KRX: 105560) and Shinhan Financial Group (KRX: 055550) are racing to build the infrastructure for these tokens. KB Financial recently partnered with Circle to explore issuing a Korean Won stablecoin.

Shinhan and Hana Financial are reportedly in talks with Samsung Electronics (KRX: 005930) to integrate stablecoin payments into Samsung Pay.