[Created using ChatGPT]
[Created using ChatGPT]

South Korea is set to enter the era of digital public finance as the government launches a pilot program this month to distribute electric vehicle charging facility subsidies using central bank digital currency infrastructure. The deposit token system is scheduled to go live July 24, with NH NongHyup Bank and four other lenders among the first to offer the service. Banks see the project as an opening move in a broader race to dominate the digital treasury market, given its potential to expand into wider government subsidy and voucher payments.

Financial industry sources said Wednesday that the Bank of Korea's institutional CBDC infrastructure will underpin a pilot program for EV charging facility subsidies, with Korea Environment Corporation set to announce participating operators July 24. Under the scheme, operators seeking to install EV chargers at parking lots, hypermarkets and similar sites will receive subsidies in the form of deposit tokens — commercial bank deposits converted into blockchain-based digital payment instruments. The program carries a budget of 30 billion won ($20.1 million), and roughly 60 companies that manufacture or install medium-speed chargers are expected to be selected.

Applying deposit tokens to the disbursement of public funds such as government subsidies marks a world first. A Bank of Korea official described the project as "a structure that brings treasury subsidies onto a programmable platform," adding that the EV charging facility subsidy program "will serve as the first test of digital currency in the second phase of the Han River Project."

Once operators are selected July 24, they will open deposit token wallets and begin preparation procedures. However, actual transactions using deposit tokens are not expected to begin immediately after the system opens, as wallet setup, administrative steps and user training will all be required. The launch timeline could also shift slightly depending on the corporation's final announcement schedule.

The program will center on NH NongHyup Bank, Korea Environment Corporation's primary banking partner. NH NongHyup Bank will issue and distribute deposit token-based vouchers equivalent to the subsidy amounts, while other participating banks will handle the conversion of those tokens into cash for their corporate clients. Companies that receive vouchers may choose which bank handles the off-ramp — the cash conversion — based on their existing banking relationships.

In total, five banks — NH NongHyup, KB Kookmin, Hana, IBK and Busan Bank — are expected to participate from the outset, handling deposit token distribution and conversion. The banks recently completed integration testing with the Bank of Korea and are in the final stages of preparation for wallet setup and token exchange services. Shinhan, Woori and two other lenders are expected to join in sequence as their systems come online.

Market observers say the project signals the start of a competition among banks to stake out early positions in the digital treasury market. Banks are participating less for immediate revenue than to build the infrastructure needed for future digital public finance business. Although the number of operators in this pilot is limited, an expansion of deposit token use to other government subsidy programs would significantly increase the value of the wallet and exchange infrastructure already in place.

Banks are expected to accelerate the buildout of deposit token-based public payment infrastructure going forward. Deputy Prime Minister Koo Yun-cheol, who also serves as minister of finance and economy, has previously stated that the government aims to convert a quarter of all treasury disbursements to digital currency by 2030. One banking industry official said annual voucher payments are understood to be around 110 trillion won, adding that the sector anticipates "business opportunities and cost savings ahead."

The project is also significant as the first case in which a government subsidy is issued as digital money with a designated use. When subsidies are paid in deposit tokens, every step from disbursement to final settlement is recorded on the blockchain in real time, enhancing transparency.

The deposit tokens issued to program participants are not general-purpose digital currency that can be freely transferred, but restricted vouchers. Subsidy recipients may use the tokens only for government-approved purposes, such as purchasing charging equipment from designated manufacturers or paying electricity bills.

For example, an operator that receives a subsidy to purchase chargers would be restricted to spending the deposit tokens at manufacturers certified under Korean Industrial Standards. This is expected to prevent fraudulent subsidy claims — such as installing substandard chargers or diverting funds — while also shortening settlement periods.

The initiative is also expected to give fresh momentum to the government's broader blockchain economy agenda. In future pilots for tokenized government bonds, institutional CBDC or deposit tokens could serve as the settlement instrument. Tokenized bonds trading in secondary markets would require a digital payment mechanism capable of handling both securities transfer and cash settlement simultaneously. On Tuesday, the government outlined plans in its second-half economic growth strategy to pursue large-scale pilot projects and secure leading technologies to drive innovation in the blockchain and digital asset ecosystem.


kyoung@heraldcorp.com
forest@heraldcorp.com