There is little concrete information on the reason for this move. Speculation is that the government hopes to dampen inflation, harm the black market, or uncover large caches of hidden cash. The official exchange rate of the won had been 140 to the US dollar, but on the black market it traded at closer to 3,000 to one.
Initially, the government planned to allow each household to exchange up to 100,000 won for new banknotes, but in the face of public protests, the exchangeable amount has been increased, initially to 150,000 won, then later to 500,000 won. These limitations apply only to cash; won deposited in banks can be converted, but only after officials investigate the source of funds over one million won. Citizens have from between 30 November and 6 December to exchange currency. New notes will start circulating from 7 December.
Courtesy of Paul Nahmias and Alex Klark.