South Korea Launches Won Internationalization Initiative for Global Investors

In upcoming developments, foreign residents in New York may establish won-denominated accounts at local banks, enabling 24/7 trading of the South Korean won without restriction to Korean market hours. This transformation follows the “Won Internationalization Roadmap” unveiled by the South Korean government and Bank of Korea on the 19th, marking the currency’s evolution from regulated status to a freely exchangeable and settlement-capable international asset.

Lee Hyung-ryul, Director General of International Finance at the Ministry of Economy and Finance, emphasized during a recent briefing that the policy aims to remove barriers for foreigners holding and utilizing won, thereby incentivizing investment in won-denominated assets. He highlighted this as a pivotal shift in foreign exchange policy designed to enhance the nation’s growth potential.

A key component of the roadmap involves constructing a 24-hour “Offshore Won Settlement Network,” set to launch next January. This infrastructure will empower qualified overseas foreign exchange institutions (RFIs) to facilitate localized won settlement for international participants, including Americans at New York-based global banks seeking to invest in South Korean equities or bonds.

To streamline overnight fund transfers across global won accounts, the Bank of Korea will establish a real-time settlement system. Notably, transactions between foreigners via this network will bypass stringent pre-reporting mandates under the Foreign Exchange Transactions Act, except for cases involving domestic real estate purchases to verify fund origins.

The government is lowering capital transaction reporting thresholds—particularly for won-denominated foreign loans—by over 100%. It also plans to transition from pre-reporting to a post-reporting-centric framework. Previously, U.S. investors faced delays due to Korean business-hour alignment; the new system allows real-time won exchanges at flexible hours via the settlement network.

Supporting infrastructure upgrades include automating securities systems, adopting Legal Entity Identifiers (LEIs) for investor identification, and enabling securities lending/borrowing of government bonds and Monetary Stabilization Bonds via International Central Securities Depositories (ICSDs). Expanded English-language disclosure frameworks will also enhance foreign access to domestic financial instruments.

To stimulate won demand in trade, the plan offers reduced export financing rates and preferential insurance terms for companies using won in international transactions. Additionally, Local Currency Trading systems (LCT) will expand with key partners to cut currency conversion costs.

In digital finance, the roadmap permits won-denominated stablecoin development and next-year pilot projects for tokenized government bonds. Measures to address liquidity gaps include temporary restricted borrowing for foreign institutions and potential central bank/Foreign Exchange Equalization Fund interventions during emergencies. Public sector currency reserves may serve as a strategic foreign exchange buffer.

Concerns about increased won volatility from 24/7 trading were addressed by authorities, who noted the stabilizing role of the Non-Deliverable Forward (NDF) market. While Deliverable Forward (DF) risks exist during shocks like the 2008 crisis, the government plans incentives for banks to shift NDF usage toward DF by September. Parallel efforts include expanding currency swap agreements and real-time liquidity monitoring systems.

Despite risks, Director Lee reiterated that the benefits of won internationalization—bolstered by South Korea’s economic stature as the 10th-largest economy and WGBI inclusion—outweigh potential drawbacks. The policy aims to modernize legacy exchange barriers in alignment with mature capital markets.”

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