In the near future, a foreigner residing in New York will be able to open a won-denominated account at a local bank and freely trade the South Korean won 24 hours a day, unconstrained by the opening hours of the Korean stock market. According to the “Won Internationalization Roadmap” announced by the South Korean government and the Bank of Korea on the 19th, the won is expected to transition from a regulation-centric currency to an international currency capable of free exchange and settlement.<\/p>\n
Lee Hyung-ryul, Director General of International Finance at the Ministry of Economy and Finance, stated at a briefing that day, “The goal is to encourage foreigners to hold won without hesitation and utilize it freely, thereby inducing investment in won-denominated assets.” He emphasized, “This policy shift holds historical significance as it represents a transformation of foreign exchange policy in a direction that can boost the nation’s potential growth rate.”<\/p>\n
24-Hour ‘Offshore Won Settlement Network’ to be Built\u2026 Liberalizing Transactions Between Foreigners<\/p>\n
The core of the roadmap is to create an infrastructure that allows foreigners to exchange and hold won locally overseas and freely trade with other foreigners. The government plans to designate qualified, top-tier overseas foreign exchange business handling institutions (RFIs) as “Offshore Won Settlement Institutions.” Through these institutions, a local American at a global bank in New York could open a won account and invest in South Korean stocks or government bonds.<\/p>\n
To facilitate real-time final settlement of fund transfers between won accounts scattered overseas, the Bank of Korea will establish a 24-hour “Offshore Won Settlement Network” starting January next year. Notably, won transactions between foreigners using this settlement network will be exempt from the stringent pre-reporting requirements for capital transactions under the Foreign Exchange Transactions Act. However, an exception will be maintained for existing pre-reporting obligations when foreigners trade domestic real estate to verify the source of funds.<\/p>\n
Lowering the Threshold for Foreign Investment\u2026 Easing Pre-Reporting and Upgrading Infrastructure<\/p>\n
The pre-reporting thresholds applied to capital transactions, such as won-denominated loans for foreigners, will be more than doubled. The government will also comprehensively review current pre-reporting categories and gradually transition to a post-reporting-centric system. Previously, a U.S. investor buying South Korean stocks or bonds had to endure the inconvenience of time differences aligned with Korean business hours. Going forward, they will be able to conveniently exchange won in advance at real-time exchange rates during their own business hours and invest seamlessly through the 24-hour settlement network.<\/p>\n
To support this, the government will upgrade infrastructure by automating securities trading and settlement systems and transitioning investor identification numbers to Legal Entity Identifiers (LEIs). It also plans to permit securities lending and borrowing of government bonds and Monetary Stabilization Bonds between foreigners within International Central Securities Depositories (ICSDs) to boost the utility of won assets. Furthermore, English-language disclosures will be expanded to facilitate foreign investment in domestic stocks and bonds.<\/p>\n
Expanding Won Demand\u2026 Linking Trade Settlement and Digital Currency<\/p>\n
Incentives to boost won demand in current account transactions will also be pursued. When domestic import and export companies use the won instead of the U.S. dollar for trade payments, they will receive benefits such as reduced interest rates on export financing or preferential trade insurance limits. Additionally, the government plans to continuously expand Local Currency Trading systems (LCT) with major trading partners to reduce currency conversion fees.<\/p>\n
In the digital finance sector, the government will establish a legal basis for won-denominated stablecoins and conduct a pilot project for government bond tokenization next year. To prepare for overnight liquidity shortages, measures will be put in place to allow foreign financial institutions to temporarily borrow the won needed for settlement without restrictions. The government is also reviewing plans for the Bank of Korea and the Foreign Exchange Equalization Fund to supply liquidity if necessary. Public sector foreign currency assets are planned to be utilized as a “second set of foreign exchange reserves” to serve as a supply tool for foreign currency liquidity in times of emergency.<\/p>\n
Drawing a Line on Volatility Concerns\u2026 “Benefits Far Outweigh the Risks”<\/p>\n
Foreign exchange authorities drew a line against concerns that the 24-hour forex market opening and won internationalization measures could increase exchange rate volatility during late-night hours. They explained that because the highly liquid Non-Deliverable Forward (NDF) market exists, it is structurally difficult for the Deliverable Forward (DF) market alone to amplify exchange rate volatility. To gradually steer NDF transactions toward DF transactions in the long term, authorities plan to devise incentives for foreign exchange banks by September.<\/p>\n
However, the risk of increased won volatility remains in the event of an extraordinary external shock, such as the 2008 global financial crisis, due to a flight to the safety of the U.S. dollar. To prepare for this, the government plans to gradually expand market stabilization capacity, strengthen bilateral currency swaps with other nations, and design a foreign exchange soundness management system by establishing new monitoring indicators to check offshore won market liquidity conditions in real time.<\/p>\n
Director General Lee Hyung-ryul stated, “If a situation like the global financial crisis occurs, global demand for the dollar surges, which could increase won volatility.” He added, “Nevertheless, we judged that the benefits obtainable from won internationalization are far greater, which is why we implemented this policy shift.” He further noted, “We will lower the outdated hurdles in the foreign exchange market in line with the matured status of our capital markets, including our position as the world’s 10th largest economy and our inclusion in the World Government Bond Index (WGBI).”<\/p>\n","protected":false},"excerpt":{"rendered":"In the near future, a foreigner residing in New York will be able to open a won-denominated account…\n","protected":false},"author":2,"featured_media":90971,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[845,9840,38865,47829,26858,47830,47828,112,11770,47827,45438],"class_list":["post-90970","post","type-post","status-publish","format-standard","has-post-thumbnail","category-seoul","tag-bank-of-korea","tag-foreign-exchange-transactions-act","tag-government-bond-tokenization","tag-lee-hyung-ryul-director-general-of-international-finance-at-the-ministry-of-economy-and-finance","tag-ndf","tag-offshore-won-settlement-institution","tag-offshore-won-settlement-network","tag-seoul","tag-stablecoin","tag-won-internationalization-roadmap","tag-world-government-bond-index-wgbi"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/90970","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=90970"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/90970\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/90971"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=90970"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=90970"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=90970"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}