Seoul: South Korea will step up efforts to improve access to the Korean won with the goal of making it a "freely convertible currency," the finance ministry said Sunday. The Ministry of Finance and Economy unveiled a road map for the internationalization of the Korean won, which refers to creating an environment in which foreigners face no barriers to obtaining or using the currency outside South Korea.

According to Yonhap News Agency, the ministry emphasized the need to establish offshore won transaction and settlement systems and remove institutional restrictions to achieve the internationalization of the won. The government highlighted the importance of this initiative, considering South Korea's strong economic fundamentals and the advancement of its capital market system.

The government expects the internationalization of the won to generate positive effects, including the development of the capital market and lower transaction costs for businesses. Businesses are anticipated to face lower costs in raising funds, exchanging currencies, and hedging against foreign exchange risks. Additionally, the impact of foreign exchange volatility on the real economy is expected to be mitigated.

While South Korea officially launched a 24-hour foreign exchange market earlier this month, the government acknowledged that foreigners still encounter structural hurdles in freely obtaining and using the Korean won overseas due to the lack of offshore infrastructure. Other challenges include requirements for foreigners to open accounts at domestic foreign exchange banks to settle transactions in Korean won and prior reporting requirements for certain capital transactions.

To address these hurdles, the government plans to improve foreign exchange regulations and market practices. The government aims to revise the methodology for calculating the benchmark exchange rate used for accounting, taxation, and transactions by aligning it with global standards, replacing the current market average rate with the time-weighted average price.

South Korea will also introduce electronic foreign exchange guidelines in August to enable automated overnight trading without personnel on duty. Additionally, measures will be taken to allow foreigners to settle transactions through Korean won accounts held at offshore won settlement institutions without needing to open accounts at domestic banks.

To promote the use of the Korean won in trade transactions, the government will provide incentives for South Korean companies to use the currency in international trade, including expanding trade insurance coverage limits. South Korea plans to establish a multi-layered risk management system by securing external financial safety nets, advancing foreign exchange policies, and ensuring coordinated implementation of policy measures.