South Korea Lays Out Won Internationalization Plan, Targets Round-the-Clock FX Trading and CBDC Progress

South Korea's Ministry of Economy and Finance on July 19, working with the Financial Services Commission, the Bank of Korea and the Financial Supervisory Service, released its "Won Internationalization Roadmap." The plan seeks to shift the won from a controlled currency toward "free convertibility" and create a trading environment without time or location constraints. A central pillar is an offshore won payment network led by the Bank of Korea, building on the country's newly launched 24-hour foreign-exchange market. After foreign financial institutions register as offshore settlement entities, nonresidents would be able to deposit, remit and make payments in won without opening a Korean bank account. The roadmap also calls for sharply reducing pre-approval requirements for won-denominated capital transactions between foreign investors. Authorities plan broad FX deregulation. Reporting thresholds for foreigners' won loans and for capital transactions would be doubled, with a longer-term transition toward a post-facto reporting framework. Won account structures will also be simplified to improve usability. On digital finance, the government will set rules for the issuance and circulation of won-backed stablecoins under the Digital Assets Basic Act. It will also push Bank of Korea pilots covering a central bank digital currency (CBDC) and tokenization of government bonds, and join the Bank for International Settlements' Agora project aimed at expanding digital cross-border settlement capabilities. Supporting measures include promoting South Korea's inclusion in the MSCI Developed Markets Index, widening eligible collateral to include government bonds and currency-stabilization bonds, allowing inter-foreigner lending of government bonds via international central securities depositories, and improving foreign investors' access to local securities. On the trade front, companies that settle in won would receive policy-based financial incentives through preferential interest rates and larger trade insurance quotas. The government also plans to expand direct local-currency trading arrangements with major partners, advance cross-border QR payment interoperability and the Asia Multilateral Payment Network (Project Nexus), and build a won settlement channel that does not rely on the U.S. dollar. To support liquidity, South Korea will create a private-sector nighttime won supply mechanism, with government and central bank backstop support when needed. Restrictions on won funding by foreign financial institutions will be eased in parallel, and custody services provided by domestic banks will be institutionalized. The government said broader international use of the won would support capital market development, cut corporate FX hedging costs and improve FX market stability. It also plans to strengthen FX stabilization policies and macroprudential management to limit volatility risks.