South Korea has officially implemented the AI Basic Act, which the government is calling the world’s first comprehensive legal framework governing artificial intelligence. While authorities say the law will help cement the country’s ambition to become one of the top three global AI powers, the move has triggered concern among startups that fear regulatory uncertainty could slow innovation.
According to Reuters, the new legislation places South Korea ahead of the European Union, whose landmark AI Act will be phased in gradually through 2027. Seoul’s law consolidates 19 separate regulatory proposals into a single framework and is now fully in force across both the public and private sectors.
What the new law requires
Under the AI Basic Act, companies must ensure meaningful human oversight when AI is used in “high-impact” sectors such as nuclear safety, drinking water production, transportation, healthcare and financial services, including credit scoring and loan assessments.
The law also requires AI companies to notify users in advance about AI-powered products and to clearly label or watermark AI-generated content that could be mistaken for real material.
Why startups are uneasy
Although the law includes a minimum one-year grace period during which no administrative fines will be imposed, many startups say they are unprepared. A survey by Startup Alliance found that only 2% of AI-focused startups have a formal compliance plan, and around half admit they do not fully understand the new rules.
“There’s a bit of resentment—why do we have to be the first to do this?” said Lim Jung-wook, co-head of Startup Alliance. Founders have also criticised the law’s vague wording, warning that it could push companies to adopt overly cautious development strategies.
President Lee Jae-myung has acknowledged these concerns, calling on policymakers to support the industry’s growth while also “pre-emptively managing anticipated side effects.”
To ease the transition, the Ministry of Science and ICT (MSIT) has launched a dedicated AI Act Support Desk to help companies assess their regulatory obligations. After the grace period ends, firms that fail to comply could face fines of up to 30 million won (about $20,400), which the government notes is significantly lower than potential penalties under the EU’s AI framework.
