The conventional wisdom on full currency convertibility is that countries should pursue it with a steady and gradual approach, because it can be destabilizing, for instance as with s peculative currency attacks, erosion of monetary policy effectiveness, and additional risks faced by financial institutions.   
   This paper aims to identity domestic institutional requirements for successful currency convertibility in Korea. Authorities should undertake reforms in the following four areas to accompany capital account liberalization: establishment of a sound and consistent macroeconomic policy framework; establishment of a strong prudential and supervisory framework; improvement of the market infrastructure for local capital and foreign exchange markets; and enhancement of risk management capabilities for financial institutions. This study emphasizes, among others, the importance of a credible macroeconomic policy stance, consistent with t he exchange rate regime, and a financial market structure sufficiently strong and flexible to allow for an effective defense against speculative currency attacks. Also examined are the Chinese government’s concerted policies to internationalize the renminbi(RMB) and the mechanics of recent speculative attacks on the RMB. The paper determines that despite the speculative pressures, the Chinese authorities can continue on with the RMB internationalization policy as they have sufficient resources and safeguard policy tools to sustain the currency convertibility program.
   To conclude, the Korean won can be successfully internationalized if it pursues foreign exchange liberalization policies with accompanying reforms to strengthen its macroeconomic, financial, and prudential regulatory policy framework.