Seoul studies independent sanction clause while amending FX trade law

[Photo by MK DB]

The South Korean government making fixes to the Foreign Exchange Transaction Act for the first time in 23 years could add regulations to enable unilateral sanctions for economic security.

According to the Ministry of Economy and Finance on Monday, the government has been examining financial sanctions clause while amending the Foreign Exchange Transactions Act.

Seoul can restrict FX trade for compliance with domestic and international rules and endeavors for global peace and security.

It can join international actions such as UN Security Council resolution, but does not have legal basis for independent sanctions.

Seoul is examining to add a provision or revise existing ones to enable independent sanctions when necessary for economic security that also can come handy as diplomatic weapon.

Economic security has become a policy strived by many countries around the world amid rapid change in global order due to U.S.-China conflict, supply uncertainty from Covid-19, and Russia¡¯s war with Ukraine.

The Korean government will study various options and amendments in the foreign exchange transactions act until the end of the year.

The centerpiece of the new act would be easing in documental report for capital transactions. The government is mulling easing rules on overseas transfers and conditions when investing overseas. It is also discussing whether to include new payment methods such as cryptocurrencies to the overall system.

The Korean government will extend foreign exchange operating hours and enable foreign financial institutions to trade FX in Korea.

Last month, the government outlined to extend foreign exchange market foreign hours to 2 a.m., Korean time, which is when the market in London closes. It is planning to operate around the clock afterwards.

The easing however could add more volatility to the won already at its weakest since 2009 against the U.S. dollar.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]