TLDR
- South Korea approved a pilot letting public officials pay some government expenses using blockchain-based deposit tokens instead of physical cards.
- Six banks will take part, including KB Kookmin, NH NongHyup, Shinhan, Woori, Industrial Bank of Korea and Hana Bank.
- The tokens run on the Bank of Korea’s Project Hangang, which uses wholesale CBDC for bank settlement and deposit tokens for user payments.
- Payments will be made by scanning QR codes, and restricted spending categories can be blocked in advance.
- The pilot builds on earlier phases of Project Hangang that tested consumer payments, subsidy transfers and cross-border settlement.
South Korea’s Ministry of Science and ICT has approved a new pilot program for government spending. The plan will let public officials pay certain operating expenses using blockchain-based deposit tokens.
The approval came during the 45th ICT Regulatory Sandbox Review Committee meeting on September 21. The ministry announced the decision the next day.
Under current law, government office operating expenses can only be paid using tools like purchase cards or bank transfers. The sandbox exemption allows testing of digital currency payments without changing that law first.
Six banks will join the trial. They are KB Kookmin Bank, NH NongHyup Bank, Shinhan Bank, Woori Bank, Industrial Bank of Korea and Hana Bank.
How the Payment System Will Work
Officials taking part in the pilot will scan QR codes on their smartphones to pay for items such as business promotion costs. These are expenses that would normally go through a physical government card.
The tokens are part of Project Hangang, the Bank of Korea’s digital money program. Under this system, commercial banks issue deposit tokens that represent bank deposits. The Bank of Korea’s wholesale CBDC is used only for settlement between financial institutions, not for direct consumer spending.
Transactions are processed on blockchain infrastructure, so payment and settlement happen at the same time. Officials can also set rules in advance to block spending in categories that government rules do not allow.
The ministry says this setup should make it easier to check how government money is spent, since all records run through the blockchain system. Officials also expect lower payment fees and faster settlement for small businesses that receive the funds.
Background on Project Hangang
Project Hangang has been running for more than a year. Its first phase started in April 2025 and let up to 100,000 people use deposit tokens at approved merchants.
A second phase began in March 2026 with nine participating banks, up from the original seven. That phase added government subsidy payments, wallet-to-wallet transfers, biometric approvals and automatic wallet top-ups.
In July, a separate 9.6 billion won project was launched to connect Project Hangang with existing payment systems used by merchants. Nine banks, eight payment companies and two large merchants joined that effort.
The goal is to let deposit tokens work with payment terminals merchants already use, rather than requiring new equipment.
Project Hangang has also been tested outside South Korea. In July, the Bank of Korea completed tokenized reserve transfer tests under the Bank for International Settlements’ Project Agorá.
One test involved NongHyup Bank and Shinhan Bank transferring 20 million won using tokenized central bank reserves. KB Kookmin Bank also completed a separate deposit token test with Japan’s MUFG Bank using a yen-based settlement.
Banks involved in the program have said that expanding deposit tokens further will require additional tools. These include anti-money laundering checks, fraud detection and systems for reporting suspicious transactions.
The government expense pilot marks the first time Project Hangang tokens will be used for public sector payments rather than consumer transactions.
