South Korea has officially launched a national initiative to expand blockchain-based digital payments through a deposit token infrastructure designed to reduce merchant costs and accelerate adoption of next-generation payment technologies. The move comes as jurisdictions worldwide explore tokenized forms of money that modernize settlement without displacing the existing two-tier banking system.

On July 22, the Korea Internet & Security Agency (KISA) and the Ministry of Science and ICT held a joint launch ceremony with participating organizations at KISA's Seoul office, marking the formal start of the Deposit Token-Based Payment Infrastructure Expansion Project.

The initiative was selected under this year's Blockchain Innovation Leading Project, a government demonstration program that identifies and promotes blockchain-based services expected to deliver broad economic and social value. The program targets practical applications supporting everyday economic activity while fostering new business opportunities.

Following an open call for proposals, an independent expert panel evaluated and selected the deposit token initiative. Government authorities stated the project will be executed in close coordination with multiple institutions, including the Ministry of Economy and Finance and the Bank of Korea, with the goal of broadening real-world deployment of deposit tokens and improving implementation results.

The project's primary objective is to expand blockchain-based deposit token payments within the private sector while reducing processing costs for micro and small businesses. South Korea already operates one of the world's most digitized payment ecosystems, with low cash usage and widespread adoption of mobile payment platforms, giving the initiative a receptive market for scaled deployment.

Consortium Structure and Budget

The Korea Financial Telecommunications and Clearings Institute will lead the initiative through a private-sector consortium comprising nine commercial banks, eight payment service providers, and two major demand-side partners. The total allocated budget stands at 9.6 billion won.

The effort builds on findings from the Bank of Korea's Project Han River, a pilot that explored central bank digital currency (CBDC)-based deposit tokens. Unlike a direct retail CBDC, in which consumers hold claims on the central bank, deposit tokens are issued by commercial banks and represent a tokenized form of commercial bank money. Authorities now plan to extend those capabilities into commercial payment environments where consumers and merchants can directly benefit from blockchain-enabled settlement.

The Korea Financial Telecommunications and Clearings Institute also intends to partner with the Ministry of Economy and Finance to extend deposit token usage into public finance applications, including business operating expenditures. Officials anticipate this wider adoption will amplify the project's economic impact.

Compatibility with Existing Infrastructure

A defining feature of the project is that merchants will not need to replace their current payment infrastructure. Rather than deploying new terminals, the system will leverage existing point-of-sale devices and online payment networks. This approach addresses a common adoption barrier seen in prior payment modernization efforts, where hardware replacement costs slowed merchant uptake.

Consumers will transact through deposit token e-wallet applications offered by participating banks. Authorities are additionally considering the introduction of physical payment cards tied to the new system.

Officials expect the updated payment and settlement framework to enhance transaction speed and operational efficiency while lowering processing fees for small merchants. Beyond cost reduction, blockchain technology is expected to improve transparency and oversight in public finance management by enabling policy-based spending controls and enhanced monitoring of fund usage.

Investment in Blockchain Industry Development

The Ministry of Science and ICT views the initiative as a means to strengthen South Korea's blockchain ecosystem by generating practical use cases that incentivize broader industry participation.

Roughly 3 billion won of the project budget will support development, operations, and promotional activities involving small and medium-sized enterprises, startups, and information technology companies. Participating commercial banks are also expected to pursue supplementary projects valued at approximately 4.5 billion won alongside the primary initiative.

Government agencies anticipate the project will accelerate blockchain adoption, enable innovative services from startups and technology firms, and reinforce South Korea's overall blockchain industry. The initiative places South Korea among several jurisdictions advancing tokenized deposit frameworks, alongside ongoing explorations by monetary authorities in Europe, the United Kingdom, and Japan.

Shin Dae-gyu, head of KISA's Digital Infrastructure Division, described the project as a significant milestone toward establishing a nationwide payment environment built on deposit tokens. He stated the infrastructure is expected to encourage IT companies and startups to develop innovative services and new business models. Shin added that KISA will apply its expertise in blockchain technology and information security to ensure the delivery of secure, reliable services while supporting the nationwide rollout of the project's outcomes.