Bank Deposits to Enable Blockchain Payments... Government Expands 'Deposit Tokens' to Everyday Use

Reducing Fees for Small Businesses and Applying to Treasury Fund Management
A 9.6 Billion Won Investment: Major Proof-of-Concept Involving 9 Banks and KFTC Begins

The use of 'deposit tokens,' which convert bank deposits into digital tokens for payments, will be significantly expanded into private payment systems and public finance sectors. The government plans to establish a new digital payment infrastructure aimed at reducing card processing fees for small business owners and enhancing transparency in the execution of treasury funds.

The Ministry of Science and ICT and the Korea Internet & Security Agency (KISA) announced on July 22 that they have launched a kickoff ceremony for the 'Expansion of Deposit Token-Based Payment Infrastructure Project' and have begun the proof-of-concept for a blockchain-based payment service.

This project involves participation from the Korea Financial Telecommunications & Clearings Institute, nine commercial banks, eight payment gateway companies (PG), and two large merchants, with a total investment of 9.6 billion won.

Deposit tokens are a means of payment where bank deposits are converted into blockchain-based digital tokens. The main feature is that there is no need to build a separate payment network, as existing card terminals and online payment systems can be used without changes. Users can make payments with deposit tokens using an electronic wallet application, while merchants can continue using their existing terminals.

The government plans to expand the deposit token technology—validated through the Bank of Korea’s central bank digital currency (CBDC) proof-of-concept project, “Project Han-gang”—into private payment services that are actually used by citizens. In collaboration with the Ministry of Economy and Finance, the government also plans to pilot the use of deposit tokens for the execution of treasury expenses such as work expenses. In the future, the scope of deposit tokens will be extended into other areas of public finance as well.

The Ministry of Science and ICT expects that establishing a deposit token-based payment system will increase settlement speeds and lower payment fees for small and medium-sized merchants. The ministry also forecasts that leveraging blockchain’s tracking capabilities will improve transparency and efficiency in the execution of treasury funds.

Hong Sungwan, Director General for Information and Communications Policy at the Ministry of Science and ICT, stated, "The proof-of-concept for deposit tokens will serve as an opportunity to expand into private services and the public sector in ways that people can directly experience," adding, "We will provide support to ensure that blockchain becomes a foundational technology driving innovation in finance and public services."

This content was produced with the assistance of AI translation services.