South Korea to test blockchain deposit tokens for government spending in Q4
Token-based payments can be programmed with spending limits and which industries can use them, reducing audits and lowering transaction fees by removing intermediaries.
What to know:
- South Korea’s Ministry of Economy and Finance will test blockchain-based deposit tokens for government spending in the fourth quarter, replacing traditional purchasing cards.
- Token-based payments can be programmed with spending limits and with restrictions on how they can be spent, reducing audits and lowering transaction fees by removing intermediaries.
- This will be the second deposit token pilot after an earlier electric vehicle-charging subsidy program.
The approval allows business promotion expenses, currently processed with government purchasing cards, to be paid using tokenized deposits.
The change alters a long-standing system governed by the Treasury Funds Management Act, which required card-based payments. In the sandbox environment, agencies will be able to operate outside those rules on a limited basis to test new methods.
Officials expect the change to improve oversight. Token-based payments can be programmed with predefined conditions, including limits on when funds can be used and which industries can accept them. This could reduce the need for manual audits, especially when spending occurs outside standard hours.
The system also removes intermediaries such as card networks, which the ministry says could lower transaction fees for small businesses that receive government payments.
