South Korea won access reforms will expand foreign use of the won, as Seoul targets a freely convertible currency with no barriers abroad.
South Korea’s finance ministry said on Sunday that it will intensify work to widen access to the won. The ministry set a goal of making the currency freely convertible for foreign users outside the country. It described the move as a road map for the won’s internationalisation. Therefore, the plan centers on offshore trading and settlement systems and on removing rules that limit overseas use.
Officials said the timing fits South Korea’s economic base and the growth of its capital markets. They said broader use of the won could support capital market development over time. It could also cut costs for businesses that raise funds, exchange currencies, and hedge foreign exchange risk. Meanwhile, the ministry said the shift may reduce the effect of exchange-rate swings on the real economy.
South Korea Won Access Steps
The ministry said foreign users still face structural barriers, even after South Korea launched a 24-hour foreign exchange market earlier this month. Offshore infrastructure remains weak, it said. For example, foreigners now need accounts at domestic foreign exchange banks to settle won trades. Additionally, some capital transactions still require prior reporting.
To address those gaps, Seoul plans to change the benchmark exchange rate used for accounting, taxation, and transactions. It will replace the current market average rate with a time-weighted average price. The ministry said that change will align the benchmark with international standards. Moreover, Seoul will issue electronic foreign exchange guidelines in August. Those rules will allow automated overnight trading without staff on duty.
Offshore Settlement and Trade Use
South Korea won access will also expand through offshore settlement changes. Foreigners will be able to settle won transactions through offshore settlement institutions, rather than through domestic bank accounts. In addition, the government plans incentives to encourage wider won use in international trade. Those incentives include larger trade insurance limits for Korean companies.
The ministry also said it will build a multi-layered risk management system as the reforms move ahead. That effort will include securing external financial safety nets and coordinating foreign exchange policy implementation.
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Source: InvestingLive
