South Korea Unveils Won Internationalization Roadmap to Promote 24/7 Trading and Digital Finance

ME News report, July 19 (UTC+8): The South Korean Ministry of Economy and Finance, in coordination with the Financial Services Commission, the Bank of Korea, and the Financial Supervisory Service, today officially unveiled the “Roadmap for the Internationalization of the Korean Won,” aiming to transform the won from a controlled currency into a “freely convertible currency” and establish a transaction environment unrestricted by time or location. Key measures include: building an “offshore won payment network” by the Bank of Korea, building upon the already launched 24-hour foreign exchange market; once foreign financial institutions register as offshore settlement entities, non-residents can deposit, remit, and pay without opening a Korean account; pre-approval requirements for won-denominated capital transactions between foreign investors are significantly reduced; foreign exchange controls are substantially relaxed, with thresholds for foreigner won loans and capital transaction reporting doubled, transitioning long-term toward a post-facto reporting system; and won account procedures are unified and simplified to enhance usability. In the digital finance sector, the South Korean government will establish rules for the issuance and circulation of won-backed stablecoins under the Digital Assets Basic Act, advance pilot projects by Bank of Korea institutions on CBDCs and government bond tokenization, and participate in the Agora project led by the Bank for International Settlements to capture the digital international settlement market. Complementary measures include promoting the inclusion of South Korea in MSCI developed market indices, expanding the range of eligible collateral to include government bonds and monetary stable bonds, permitting international central securities depositories to facilitate interforeigner government bond lending transactions, and enhancing foreign investor access to securities. On the trade front, policy-based financial interest rate incentives and expanded trade insurance quotas will be offered to enterprises settling in won; direct local currency transaction systems will be expanded with major trading partners; cross-border QR payment interoperability and the Asia Multilateral Payment Network (Project Nexus) will be advanced to build a won-denominated settlement channel independent of the U.S. dollar. On the liquidity front, a private-sector overnight won supply mechanism will be established, with government and central bank backstop support as needed. Restrictions on foreign financial institutions’ won financing will be simultaneously eased, and domestic bank custody services will be institutionalized. The government stated that won internationalization will drive capital market development, reduce corporate foreign exchange hedging costs, and enhance foreign exchange market stability; however, it will also require upgrading foreign exchange stabilization policies and macroprudential management systems to mitigate volatility risks. (Source: BlockBeats)