South Korea’s technology sector is pushing back against the country’s AI Basic Act, which took effect on January 22, 2026, making it the first nation to enforce a comprehensive legal framework guiding the development and usage of artificial intelligence (AI).
The legislation establishes safety and transparency requirements for AI systems, particularly those classified as “high-impact” AI used in healthcare, finance, hiring, and public services.
However, the law has triggered widespread concern among startups, industry groups, and civil society organizations who argue that unclear guidelines and rushed implementation threaten to stifle innovation in one of Asia’s most dynamic tech ecosystems.
While the government has granted a one-year grace period before imposing penalties of up to 30 million won ($15,000), most companies remain unprepared. A survey by the Startup Alliance found that 98% of local AI startups have not established compliance systems, with nearly half admitting they are unfamiliar with the law’s details.
Why Startups Are Worried
The protest is based on several practical concerns. Companies are expected to self-assess whether their AI systems qualify as “high-impact,” but official confirmation from the Ministry of Science and ICT can take up to 90 days. This creates uncertainty for startups planning product launches or updates. Lim Jung-wook, co-head of the Startup Alliance, captured the frustration when he asked, “Why do we have to be the first to do this?”
Compliance requirements have already forced some firms to delay product launches, and not out of protest, but from uncertainty about how to meet the new standards. The watermarking requirement for AI-generated content proves especially challenging.
More importantly, the compliance burden hits smaller companies particularly hard, as startups lack the legal and financial resources that larger corporations can deploy to navigate complex regulations.
The Startup Alliance released recommendations calling for exceptions for non-risk use cases, government-led checklists instead of self-assessment, and simplified compliance frameworks specifically designed for startups. Industry representatives have also warned that growing numbers of South Korean AI companies are now considering Japan, which has adopted a voluntary governance approach as an alternative market for launching services.
And while startups complain the regulations are too burdensome, civil society organizations are making the opposite argument. Without independent oversight or meaningful penalties during the grace period, civic groups argue the law risks becoming more like a symbol and less effective, with algorithmic bias and biometric surveillance flagged as areas needing tougher enforcement.
The tension reflects broader concerns about how South Korea’s regulatory architecture will function.
What’s at Stake
The outcome of this regulatory implementation carries implications beyond South Korea’s borders. On one end, if the country successfully balances innovation with safety requirements, it could establish standards that influence global AI governance. On the other, if compliance costs and regulatory confusion drive companies overseas or slow product development, it might serve as a cautionary tale for other nations considering comprehensive AI frameworks.
For now, South Korea’s tech sector navigates this new regulatory landscape with a mix of caution and hope. The government’s willingness to delay penalties and provide guidance suggests recognition that the transition will be challenging.
Whether this comprehensive approach to AI regulation becomes a model for responsible innovation or an obstacle to technological progress depends largely on how effectively authorities can clarify requirements without crushing the entrepreneurial spirit that has made South Korea a tech powerhouse.
