Currency Issue System – Bank of Korea

October 21, 2014 12:01 am

According to the Bank of Act, the primary purposes of the Bank are
to maintain the stability of the value of money in the interests of
national economic progress and to further economic progress and
efficient utilization of national resources by the sound operation and
functional improvement of the nation’s banking and credit system. The
Bank has the sole right to issue currency and may issue it in whatever
size, design or denomination may be determined by the Monetary Board,
subject to the approval of the Government. However, no rules are
prescribed in its governing statute about the issuance reserve or the
limit of issue because a perfectly managed currency system was adopted.

At the time of the inauguration of business, the Bank of Korea
accepted from the Bank of Chosun notes of 100 Won, 10 Won, 5 Won and 1
Won(1 Won = 100 Jeon) plus 50 Jeon, 20 Jeon, 10 Jeon, 5 Jeon and 1 Jeon
small notes in addition to petty subsidiary money of the Japanese
Government, all of which were regarded as issued by the Bank of Korea
according to the Act. For these reasons, currency already issued
continued in circulation as legal tender for public and private
transactions without restriction.
The new banknotes issued at the time of the third currency reform in
1962 were in six denominations : 1, 5, 10, 50, 100 and 500 Won. They all
were printed at the Thomas De La Rue Company in England.

The Bank of Korea subsequently issued new 10 Won notes (series
II), on September 21, 1962, and new 100 Won notes (series II) on
November 1 that year for the purpose of replacing the imported 10 and
100 Won notes by domestically printed ones. 10 Jeon and 50 Jeon notes
were also issued for convenience in the settlement of change in petty

The intaglio printing method was introduced in 1965 to prevent
counterfeiting and improve the quality of banknotes. The third series of
100 Won notes, the first to be domestically manufactured using intaglio
printing, were issued by the Bank of Korea on August 14, 1965 and the
second series of 500 Won notes on August 16, 1966. Litho-printing was,
however, used for the third series of 50 Won notes issued on March 21,

As the scale of transactions increased and price levels rose in
response to the rapid pace of economic development from the middle of
the 1960s, the argument for the issue of higher denomination notes
became stronger. The denomination of the then highest value notes, 500
Won, was low in comparison with the scale of transactions. This resulted
not only in a great demand for cash, whose production cost was high,
but also in financial disorder through the widespread appearance of
counterfeit cashier’s checks, as fixed denomination cashier’s checks
came to substitute for cash as a means of payment.

Eventually, the Bank of Korea issued 5,000 Won notes (series I)
on July 1, 1972 and 10,000 Won notes (series I) on June 12, 1973. Both
the 5,000 and 10,000 Won notes were notable for their design and
security features. The design of the 5,000 Won notes featured a portrait
of the famous Chosun Dynasty scholar Yi I on the obverse and the main
office of the Bank of Korea on the reverse. A watermark, security
thread, and ultraviolet response fiber were incorporated as important
security features. The characteristics of the 10,000 Won notes were the
same as those of the 5,000 Won notes except that they bore a portrait of
King Sejong the Great on the obverse and one of Kyongbok Palace on the

Newly-designed 500 Won (Series III) notes were released on
September 1, 1973 and, in response to the need for medium denomination
notes to meet the increasing size of transaction units resulting from
rising incomes and prices, and 1,000 Won notes (Series I) were issued on
August 14, 1975. At the outset of the 1980s, the Bank of Korea set
about standardizing the currency system to overcome the imperfections of
the banknotes and coins which had been issued earlier. The Bank of
Korea issued new 1,000 Won notes(Series Ⅱ), revised 5,000 Won notes
(Series III) on June 11, 1983, and new 10,000 Won notes (Series III) on
October 8 of the same year as part of its policy of rationalizing the
currency system. The most important thing about these issues was their
adoption of various features such as see-throughs, distinguishing marks
for the blind and common machine readable language in preparation for
mechanization of cash handling and to guard against the circulation of
counterfeit notes. Furthermore, the change of banknote material from
waste cotton or pulp to pure cotton made it possible to reduce
production costs by extending circulation life.

As the import of color copiers had been derestricted and the
risk of counterfeiting had increased, the Bank of Korea issued a new
series of 10,000 Won notes incorporating enhanced security features on
January 20, 1994. The new series IV 10,000 Won notes had the same
design, and prevailing color as the Series III 10,000 Won notes.
Additional security features included windowed thread, micro lettering,
moir and intaglio latent image.

In a further move to rationalize the currency, the Bank of Korea
suspended the issue of Series III 500 Won notes, which were replaced by
coins, and of Series I 1,000 Won, Series II 5,000 Won, and Series II
10,000 Won notes on May 12, 1993, all of which had had very limited
The Bank of Korea issued 1 Won, 5 Won and 10 Won coins on August 16,
1966 to substitute for the 10 Hwan and 50 Hwan coins that had circulated
along with the newly-issued banknotes following the third currency
reform in 1962 in accordance with the “Law Concerning Temporary Measures
for the Circulation of Struck Coins” of August 27, 1962.

On August 26, 1968, as the intrinsic value of the 1 Won brass
coins far surpassed their face value, new 1 Won(Series II) aluminum
coins were issued to replace them. To facilitate small transactions and
reduce currency production costs, new 10 Won(Series II) and 5 Won(Series
II) coins were issued on July 16, 1970 ; 100 Won coins on November 30
of the same year ; and 50 Won coins on December 1, 1972.

The Hwan coins were declared no longer legal tender from March
22, 1975 following the abrogation of the “Law Concerning Temporary
Measures for Circulation of Struck Coins” in December 1974.

New 500 Won coins were issued from June 12, 1982 to meet the
demand for high denomination coins resulting from inflation and the
popularization of vending machines. They replaced the 500 Won note,
whose production costs had gradually increased. Concerned to keep the
currency system in good order, the Bank of Korea eventually set up a
standardized coin system by issuing new 100 Won(Series II), 50
Won(Series II), 10 Won(Series III), 5 Won(Series III), and 1 Won(Series
III) coins on January 15, 1983.

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