South Korea Unveils Roadmap for Won Internationalization, Easing Foreign Access to Currency Markets

South Korea has unveiled a comprehensive plan to make the won freely tradable among foreign participants, marking its most ambitious step yet toward full currency convertibility and the liberalization of its foreign exchange market.

The measures, announced Sunday in a joint statement by the Ministry of Economy and Finance, the Bank of Korea, and financial regulators, will permit foreign investors to conduct unlimited won transactions through pre-registered foreign firms. Effective January 2027, this eliminates the current requirement for non-residents to open won-denominated accounts within South Korea.

Under the new framework, won transfers between foreign entities will be exempt from advance reporting requirements for most capital transactions, with the exception of domestic real estate. Beginning in September, banks will only need to verify basic account information to process these transactions. Settlements will be routed through a new 24-hour Bank of Korea network, which is slated to begin pilot operations in September ahead of full implementation in 2027.

Authorities also plan to introduce incentives in September to encourage a shift from non-deliverable forwards (NDFs) to deliverable forwards, while exploring ways to support foreign bank branches in conducting nighttime operations. The regulatory overhaul will more than double reporting thresholds for capital transactions such as won lending to foreigners and simplify verification procedures at foreign-exchange banks.

The reforms represent a significant policy shift for Asia’s fourth-largest economy, which has historically maintained tight capital controls despite its stature as a major exporter. The changes align South Korea more closely with the standards of developed financial markets, a move designed to attract global capital and expand the won’s international footprint.

This package builds on the launch of extended 24-hour won trading earlier this month, which enabled overseas investors in New York to trade during their local business hours. Collectively, the reforms will allow non-residents to trade, transfer, and settle the currency directly among themselves outside South Korea around the clock.

The roadmap signals a decisive break from exchange-rate policies shaped by the 1997 Asian financial crisis and the 2008 global financial crisis, when authorities prioritized capital controls and stability over market openness. Restrictions on FX trading have long been cited by index provider MSCI Inc. as a primary obstacle preventing South Korea’s reclassification to developed-market status. A more freely usable won could also enhance the appeal of Korean assets to global reserve managers, pension funds, and institutional investors seeking currencies with fewer operational constraints.

“The point is to lay a dedicated road so that foreigners can more easily deposit and hold won, or use it for payment, settlement, funding, investment and transfers,” said Kim Hee-jae, a director at the Finance Ministry’s international finance division. Transactions conducted outside the new channel will remain subject to the existing Foreign Exchange Transactions Act, though those rules are also being relaxed.

To deepen offshore demand, the government will permit securities lending of South Korean treasury and monetary stabilization bonds between foreign investors via international central securities depositories such as Euroclear and Clearstream. It will also expand foreign central banks’ and international institutions’ access to the interbank repurchase market, allow non-residents to invest idle won in short-term instruments, and study incentives for settling trade in won.

To ensure liquidity, a two-tier funding backstop for overnight markets is planned: foreign-exchange banks will provide overdrafts to foreign investors, with the Bank of Korea standing ready to offer additional support. The foreign-exchange stabilization fund may also be utilized until the central bank’s settlement infrastructure is fully upgraded.

The reforms arrive after a period of significant volatility for the currency. The won was Asia’s worst performer in the first half of the year, recently touching its weakest level since 2009. Nevertheless, policymakers argue that the country’s improved external balances and deeper financial markets have mitigated the risks that once justified strict controls.

“South Korea has matured considerably in both current account and capital transactions,” said Lee Hyoung-ryoul, director general for international finance at the finance ministry. “Rather than being at a stage of worrying about side effects, like a currency crisis, we have judged the time has come to shift policy towards capturing the benefits of internationalization to the fullest.”

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