In the future, foreign investors will be able to borrow Korean won from global banks in New York or ..

For example, U.S. asset managers will be able to borrow won from a global bank in New York and then buy shares of Samsung Electronics or store investment funds in Korean government bonds in advance. Capital transactions in won between foreigners using offshore won settlement institutions are exempt from the obligation to report in advance, except for real estate transactions. The standard amount for reporting capital transactions, such as KRW loans to foreigners, will be doubled compared to the current amount, Pre-reporting of capital transactions is also gradually converted to post-reporting.

“Now, if foreigners want to invest in won stocks or government bonds, they cannot exchange money during the day or at night in Korea,” Director Lee said. “Removing these restrictions is the core content of the won’s internationalization.”

However, it is not a “complete liberalization” that allows all foreign banks to trade won without restrictions. This is because Korean won accounts can only be created through an offshore won settlement agency registered in advance with the government.

Domestic residents will also benefit from the internationalization of the won. Since the 6th, the won-dollar foreign exchange market has been operating 24 hours a day, allowing domestic individual investors to buy overseas stocks by exchanging them at real-time exchange rates at night. Previously, financial companies had to apply the exchange rate set during the day when the domestic foreign exchange market was closed.

In addition, when domestic exporters do business with foreign companies, they will be able to open a won account at a foreign bank to receive export payments in won. This can reduce the risk of exchange rate fluctuations from the perspective of exporting companies. Domestic financial institutions can also develop various financial products related to the won to pioneer overseas business. For example, domestic financial companies can play a role in allowing Samsung Electronics and SK Hynix to issue won bonds in New York.

The reason why the government is speeding up the internationalization of the won is to incorporate the MSCI Advanced Countries Index. In the MSCI annual market classification released last month, South Korea was not included in the developed countries’ index observation list. It has remained in emerging markets for 12 years since it was excluded from the observation in 2014.

The MSCI has pointed to the difficulty of actually exchanging the won overseas and the lack of liquidity in the overnight foreign exchange market as major problems in the Korean market. The government plans to improve the foreign exchange system overall by next year to meet MSCI demands. If included in the MSCI index of advanced countries, the constitution of the domestic stock market could be improved as global passive funds worth up to $36 billion flow into the domestic stock market.

In addition, the government plans to provide export finance benefits when large-scale purchase contracts signed with foreign governments such as defense and nuclear power plants are signed in won to enhance the won’s attractiveness. In addition, when the Export-Import Bank of Korea provides sublease financing to overseas local banks, it plans to give credit limit not only in dollars but also in won.

The government also said it will prepare a safety valve for concerns such as increased volatility caused by the opening of the foreign exchange market. For example, the government plans to use the public sector’s foreign currency assets as a “second foreign currency reserve” that is used as a means of supplying foreign currency liquidity in case of emergency.