SEJONG -- The Yoon Suk-yeol administration is considering revising the law on foreign exchange transactions for the first time since it was legislated 23 years ago, officials said Monday, drawing market eyes to whether the government would be granted the authority to impose financial sanctions on overseas traders “independently.”

Under the current law, the Korean government is only entitled to apply sanctions in accordance with the international community’s joint moves toward sanctions, via resolutions of the United Nations, against a country or other perpetrators. But the current rule lacks legal ground for the government to impose sanctions in an independent manner, irrespective of global agreement, according to local lawyers.

Officials said the government’s move to revise the law is aimed at protecting the nation’s economy. If revised, the law would offer legal grounds for the government to impose independent sanctions on individuals or entities engaged in fraudulent foreign currency transactions.

The move is also in line with major economies’ policies, prioritizing their own economic security amid the ongoing conflicts between the US and China, the prolonging Russian invasion of Ukraine and glitches in the supply of raw materials due to the pandemic.

Officials at the Finance Ministry, however, said open discussions on the matter would continue at least until the end of the year, indicating that the revision could take some time.

Alongside the possible law revision for independent financial sanctions, the government plans to streamline traders’ obligations of informing the financial authority of their money transfers to foreign countries or overseas investments.

Rampant petitions have been filed with the government over relatively complicated procedures for transfers and investments.

Another point of interest is extending the closing time of the local foreign exchange market to 2 a.m. overnight, from the current 3:30 p.m., which was publicized during the government’s unveiling of economic policy directions.

While the government plans to announce details on the extension of foreign exchange trading hours in the third quarter of the year, it has the ultimate goal of conducting 24 operating hours on a mid-term or long-term basis.

Critics say the extension would expand the volatility of exchange rates for the local currency, citing the won’s depreciation against the US dollar due to external factors, despite robust fundamentals in its economy.

In addition, the government is likely to discuss petitions from stock brokerage firms that have called for the authority to grant right of operating businesses of currency exchanges and money transfers. Currently, only first-tier commercial banks have such rights.

Nonbanking financial services firms say there is an urgent need for the nation to cope with fast-changing environments in the global financial market by pushing for an overhaul of relevant regulations.

By Kim Yon-se (kys@heraldcorp.com)