This is because, while converged services—centered on artificial intelligence (AI) and blurring the boundaries between industries such as information and communications technology (ICT), healthcare, mobility, and finance—are rapidly emerging, regulations remain fragmented across different government agencies and laws. Even when a company manages to enter the regulatory sandbox, it takes a considerable amount of time to coordinate with relevant ministries, and even after completing pilot testing, delays in revising laws and regulations mean businesses are repeatedly forced to continue operating under “temporary status.”
Demand for AI Regulatory Innovation Triples… But Corporate Applications Decline
According to the Ministry of Science and ICT and industry sources on the 31st, the total number of applications for the ICT Regulatory Sandbox fell from 110 in 2024 to 67 last year. This year, the number stood at 33 as of July, a decrease of about 30% compared to the 47 applications filed during the same period last year.
New applications for pilot exemptions also fell by more than 40% to 19 through July of this year, down from 32 during the same period last year. The number of regulatory sandbox designations—combining provisional permits and pilot exemptions—also decreased from 51 in 2024 to 45 last year, and stood at just 8 through July of this year.
In contrast, demand for regulatory innovation related to AI is growing rapidly. As of July of this year, there were 12 new projects, a threefold increase from the four projects during the same month last year. Of these, 11 were AI-related projects.
In the age of AI, while demand for deregulation is growing, a paradox is emerging: the number of companies applying for the regulatory sandbox and those receiving special exemptions is actually decreasing.
Self-drivingcars,
care robots…
the more convergent the technology, the more “ping-pong” between government agencies
Data is a major stumbling block for AI regulation.
To improve the AI performance of self-driving cars or delivery robots, they must be trained using footage captured on actual roads; however, such footage may contain personal information, such as pedestrians’ faces and vehicle license plates. Companies like Kakao Mobility and Woowa Brothers were only able to use the original footage for AI training after receiving special exemptions through the regulatory sandbox.
Although the Personal Information Protection Commission moved to amend the Personal Information Protection Act to permit the use of personal information during the AI development process, it took a considerable amount of time for these regulatory relaxations to be enacted into law.
Ahn Seong-jang, an adjunct professor at Chung-Ang University (and former senior policy advisor to the Democratic Party), pointed out, “In the AI era, technology is advancing rapidly, so we must create a pathway in this area to revitalize the industry.”
Similar issues are emerging in projects currently underway.
Startup A, which develops AI care robots, has been receiving preliminary consultations for four months now after applying for a pilot exemption under the ICT Regulatory Sandbox in May of this year. Determining whether the AI care robot qualifies as a medical device or a welfare device supporting daily life is no easy task, and consultations among relevant government agencies continue regarding AI safety, personal information protection, and existing standards.
This is because, although the Regulatory Sandbox was created with the convergence of various industries in mind, the system remains divided by industry. Currently, the ICT Regulatory Sandbox is fragmented across six ministries and eight sectors.
“30-day processing” in name only… but in reality, it takes over a year
Under the current Information and Communications Convergence Act, the ICT regulatory sandbox is divided into categories such as expedited processing, temporary permits, and special exemptions for pilot projects, and requires that results be notified within 30 days of application submission.
However, the waiting period experienced by companies is much longer. This is because the process of supplementing documents or consulting with relevant ministries on regulatory issues—which takes place through preliminary consultations with organizations such as the National IT Industry Promotion Agency (NIPA) prior to formal submission—can be lengthy.
KTCorporation(030200)Even the “LTE local phone” service, which utilizes wireless networks and was approved this past May, took over a year to resolve disagreements among relevant ministries. From a company’s perspective, this means they must wait a considerable amount of time even before the statutory 30-day processing period begins.
The problem is particularly acute with demonstration exemptions, as the system does not require legislative revisions to be completed within the exemption period. Even if a company manages to secure a demonstration exemption and launch its business, it will have to shoulder regulatory risks again once the exemption period ends if the relevant laws and regulations remain unchanged.
Repeated Approval Rather Than “First Penguin”
There are also criticisms that the sandbox is becoming a channel for repeatedly approving businesses that have already received exemptions, rather than a pathway to relaxing new regulations.
Looking at actual designation cases, there are quite a few instances where similar or identical projects—such as “urban smart storage convenience services” and “electronic services for urban redevelopment general meetings”—for which precedents have already been established, are repeatedly designated. This suggests that the system is being used to allow businesses that have already paved the way to receive the same exemptions again, rather than to serve as a “first penguin” that breaks new regulatory ground for emerging industries.
There are also cases where business models that are more than 10 years old remain within the sandbox. Although shared lodging is a long-established business model, delays in related legislation have allowed it to continue operating through pilot exemptions.
A similar situation has unfolded in the financial sector. Lucent Block, a real estate fractional investment platform, was designated as an “innovative financial service” through the Financial Regulatory Sandbox in 2021, but due to delays in formal institutionalization, it had to extend its special exemption to continue operations.
This is why critics argue that the regulatory sandbox has remained merely a “regulatory reprieve” rather than achieving its original goal of “regulatory improvement.”
Government Also Revising the System… “Authority to Adjust Is More Important Than the Channel”
The government has also set out to reform the system to address these issues. Prime Minister Han Seong-sook announced on the 20th at a roundtable discussion on regulatory innovation in new industries that the government would improve the regulatory sandbox system, mandate the revision of laws and regulations, and establish a one-stop integrated support center under the Prime Minister’s Office.
An official from the Prime Minister’s Office said, “Companies complain that, due to the current structure—which is divided among six ministries and eight sandboxes—they don’t even know where to submit their applications,” adding, “We are reviewing a plan to provide comprehensive guidance and support through the one-stop support center.”
Experts point out that simply consolidating application channels into a single point of contact is insufficient. They argue that substantive authority is needed to mediate disagreements between ministries and drive regulatory improvements.
Lee Won-woo, director of the Center for Public Interest and Industrial Law at Seoul National University, emphasized, “Merely unifying the application process in a perfunctory manner is meaningless,” adding, “It is crucial to determine who will mediate when disagreements arise between ministries during the review process.”
Some also point out that, ultimately, the solution goes beyond merely expanding the regulatory sandbox; the regulatory system itself must be overhauled. Professor Lee explained, “Since Korea operates under a positive list system, the structure effectively prohibits anything not explicitly permitted,” adding, “The problem can only be resolved by shifting the entire system to a negative list approach.”
