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The Ministry of Economy and Finance of the Republic of Korea (MOEF) plans to initiate testing of government expenditures using deposit tokens. These are digital certificates issued by commercial banks and utilized as a means of payment solely within the scope of the experiment.
Nine major banks, including KB Kookmin, Shinhan, Woori, and Hana, will participate in the experiment, focusing on the issuance and management of the tokens. Budgetary payments using tokens will take place in the city of Sejong, which has a special legal status. This city was granted its unique status in 2007, and since then, 13 South Korean ministries and agencies have relocated here from the capital, Seoul.
The experimental token transactions aim to integrate the government’s digital budget and accounting system (dBrain) with blockchain technology, enabling authorities to more effectively monitor financial operations.
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Currently, government agencies utilize bank accounts and even banking, credit, and debit cards for operational expenses. However, any transactions made late at night or outside of business hours often necessitate additional approvals. Consequently, officials are required to provide detailed reports to justify such expenditures, which slows down processes and increases the workload for government employees.
The Ministry of Finance and Economy believes that deposit tokens can address the issue of excessive bureaucracy by allowing for predefined rules regarding fund usage. For instance, operations could be restricted to specific hours or approved categories, eliminating the need for manual confirmation of each transaction afterward.
In South Korea, a Digital Asset Basic Act is being prepared to regulate stablecoins, tokenized assets, and cryptocurrency exchange-traded funds (ETFs). However, lawmakers have postponed discussions on this legislation due to the upcoming regional elections.
In March, the Bank of Korea moved to the second phase of testing its own central bank digital currency (CBDC) for payments and settlements, as well as for distributing government subsidies. The pilot project employs wholesale digital won and deposit tokens from commercial banks.
