Foreigners to be able to hold and send won abroad as government pushes for currency internationalization

South Korea is embarking on a significant initiative to elevate the international standing of its currency, the won, with the unveiling of the "Won Internationalization Roadmap." This plan aims to transform the won into a freely tradable currency on the global stage, a move designed to enhance its international utilization and, in the long term, stimulate foreign investment in won-denominated assets.

A cornerstone of the roadmap is the establishment of an "offshore won settlement system." This system will permit foreign financial institutions, upon meeting certain criteria and registering with the Ministry of Economy and Finance, to offer won-related services such as deposits, loans, and remittances to foreigners directly from their overseas branches. This mirrors the convenience available to Koreans who can open dollar accounts and conduct transactions domestically.

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The 24-hour operation of the foreign exchange market means we have created a market where foreigners can trade the won and dollar during their daytime hours, and now, for foreigners to invest in won assets, overseas financial institutions must be able to create won accounts for them, and that is the offshore won settlement institution.

To facilitate these cross-border transactions, the government will waive prior reporting requirements for capital transactions between foreigners, excluding real estate dealings within South Korea. Bank verification duties will also be minimized to essential account information. The Bank of Korea will introduce a new "offshore won settlement network" operating 24 hours a day, beginning in January next year, to support the final settlement of these international won transactions.

This strategic push follows the recent opening of the Seoul foreign exchange market to 24-hour trading. The government believes that as South Korea's capital markets, including its stock and government bond markets, continue to expand and attract foreign investment, improving the ease of won transactions is a necessary step. This policy shift marks a departure from the previous nearly 30-year focus on crisis prevention since the 1997 Asian financial crisis, signaling a proactive approach to leveraging the benefits of internationalization.

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It is time to shift policy towards reaping the benefits of internationalization rather than delaying due to concerns about side effects.