Bank of Korea Governor Shin Hyun-song stated that supervision gaps will be prevented in the offshore won settlement system ahead of its September pilot launch. Speaking at a press conference on the 16th following the Monetary Policy Board meeting, Governor Shin addressed concerns that the new system could create loopholes in anti-money laundering (AML) and real-name verification compared to the existing Investor Registration Certificate (IRC) system. The offshore won settlement system will allow foreigners to hold and settle Korean won through accounts at offshore won settlement institutions without opening domestic accounts, with final settlement conducted through the Bank of Korea's offshore won settlement network.
Offshore Won Settlement System Operates Through Foreign Institutions
The offshore won settlement system enables foreigners to store and settle Korean won using accounts in their own names at offshore won settlement institutions located abroad, without needing to open accounts within South Korea. Final settlement is processed through a consolidated won account that offshore settlement institutions maintain at domestic banks, which then connects to the Bank of Korea's offshore won settlement network. The Bank of Korea is advancing the system's implementation through a pilot operation beginning in September.
Governor Shin Assures No Supervision Gaps in New System
Market participants have raised concerns that the simplified account opening procedures compared to the IRC system could weaken supervision frameworks for anti-money laundering and real-name verification. When asked about these potential regulatory vulnerabilities during the introduction of the offshore won settlement system, Governor Shin responded, "We will ensure there are no supervision gaps." At the press conference, Governor Shin also clarified that "24-hour dollar-won trading and the offshore won settlement system should be viewed separately," explaining that "the won settlement system is a concept where Korean won traded between foreigners abroad is ultimately settled through the Bank of Korea's reserve deposits."
BOK Aims to Migrate NDF Trading to Onshore DF Market
Governor Shin stated that the offshore won settlement system will serve as an opportunity to guide non-deliverable forward (NDF) transactions conducted offshore into the onshore deliverable forward (DF) market. He added that this migration would "ultimately increase market transparency and bring won accessibility into the institutional framework."
FAQ
What did Bank of Korea Governor Shin say about supervision in the offshore won settlement system?
Governor Shin Hyun-song stated at a press conference on the 16th that "there will be no supervision gaps" in response to concerns about potential loopholes in anti-money laundering and real-name verification compared to the existing IRC system.
When will the offshore won settlement system begin operations?
The Bank of Korea is proceeding with implementation through a pilot operation starting in September, as stated by Governor Shin at the Monetary Policy Board press conference on the 16th.
How does the offshore won settlement system differ from 24-hour dollar-won trading?
Governor Shin explained that the two should be viewed separately, describing the offshore won settlement system as a concept where Korean won traded between foreigners abroad is ultimately settled through the Bank of Korea's reserve deposits.
