South Korea Pilots Blockchain Deposit Tokens for Government Spending

The initiative, part of the Bank of Korea’s broader Project Hangang, received regulatory clearance during the 45th ICT Regulatory Sandbox Review Committee meeting on September 21. By bypassing traditional National Treasury Funds Management Act requirements, the trial allows officials to test digital currency infrastructure without immediate legislative overhauls. Six major financial institutions, including KB Kookmin Bank, Shinhan Bank, and Hana Bank, are participating in the rollout.

Unlike direct retail central bank digital currencies, the system utilizes a two-layer structure. Commercial banks issue deposit tokens backed by bank deposits, while the Bank of Korea facilitates wholesale settlement between institutions. This model allows for immediate transaction finality and built-in compliance controls, such as pre-designating restricted categories to prevent unauthorized spending. Authorities anticipate that the transition will reduce payment fees and provide faster settlements for small businesses processing government transactions. The project follows a multi-year testing phase for Project Hangang, which has previously explored consumer payments, person-to-person transfers, and government subsidy disbursements.