The "international won settlement network" being pursued by the Bank of Korea is a central bank large-value settlement infrastructure that will allow overseas financial institutions and foreign investors to transfer, deposit and settle in won abroad around the clock, without opening separate accounts at domestic commercial banks. Until now, won transfers have been confined within two boundaries: the daytime hours when the BOK's payment system operates and the internal account networks of domestic banks. The introduction of the international won settlement network is a major infrastructure shift that breaks down these barriers of time and space, transforming the won from a "domestic-only currency" into a "freely convertible currency" that circulates freely in global financial markets.
Global investors have faced two structural constraints in won transactions. The first is the burden of prefunding. Payment for Korean government bonds must be deposited on the morning of the settlement date, but with overseas markets closed at that hour, prefunding was unavoidable, forcing investors to bear the resulting opportunity costs and foreign exchange risk. The second is the absence of access to central bank money during overnight hours. The international standard, the Principles for Financial Market Infrastructures (PFMI), recommends using risk-free central bank money as the primary settlement asset to ensure financial stability. The won is settled through the BOK's network on a payment-versus-payment (PvP) basis during the common settlement window of the Continuous Linked Settlement (CLS) system, from 3 p.m. to 8 p.m., but this central bank money could not be used at night. Once the international won settlement network is operational, these settlement bottlenecks will be resolved. Settlements can be made abroad using the safest central bank money 24 hours a day, enabling overnight won transfers between Registered Foreign Institutions (RFIs) and the timely funding of settlement payments. In addition, rather than immediately converting received won, institutions can deposit it with local financial institutions through RFI agents for later reinvestment. This reduces the volume of won sold in the foreign exchange market, contributing to exchange rate stability and strengthening the won's function as a store of value.
For this settlement innovation to take hold, three key tasks must be addressed. The first is the careful design of a liquidity support system to prevent "settlement gridlock" caused by overnight funding shortages. Support mechanisms centered on regular operating hours, from 9 a.m. to 8 p.m., must be extended to a 24-hour framework, with refinements to details such as eligible institutions, collateral management and automatic approvals. The second is establishing a daily closing time and settlement system suited to 24-hour operation. Because the closing time serves as the basis for reserve accumulation, the calculation of deposit and loan interest, and the confirmation of balances, the time distinguishing one business day from the next must be clearly defined, along with a process for same-day closing and real-time business-day rollover without interrupting settlement. The third is completing an overnight business continuity plan (BCP) for round-the-clock operation. Because operating a large-value settlement network 24 hours a day is an unprecedented undertaking, protocols must be thoroughly prepared to instantly detect and recover from any disruption in the network's links with the Korea Securities Depository, the Korea Financial Telecommunications and Clearings Institute, the Korea Exchange, CLS and its 134 participating institutions.
The success of financial opening depends not on declarative slogans but on the density of the settlement networks through which funds flow and the safety of settlement assets. By combining the CLS foreign exchange settlement system with the 24-hour central bank money settlement function of the international won settlement network, a key artery will be completed through which global capital can flow into the Korean market without time differences or risk. The hope is that a robustly built international won settlement network will enable the won to emerge as a currency freely used in global finance, serving as a solid foundation for won internationalization that broadens the horizons of Korean finance.
