[Economy Pulse] The First Requirement for a Startup Nation Is Trust in the Government

The government has recently sent the message, "Anyone can start a business if they have an idea," through its "Startup for All" project. This bold initiative offers up to 1 billion won in business development support and investment linkage. At a time when youth unemployment and inequality are worsening and artificial intelligence (AI) is rapidly transforming industries and jobs, the government's direction to encourage more people to start businesses is commendable. Although there was serious criticism over the leakage of applicants' information during the selection process, the policy initiative itself—aiming for a startup-driven nation—deserves to be applauded, regardless of this incident.

However, a single selection event and some financial support alone will not create a startup nation. The reason Silicon Valley attracts talent and capital from around the world is not primarily due to government subsidies. It is because the world has repeatedly witnessed people changing the world and achieving great wealth through startups, and these success stories continually inspire new entrepreneurship and investment. When it becomes common to see people around you who have changed their lives through starting a business, talented individuals will increasingly choose entrepreneurship over medicine or large corporations. What creates a startup nation is not financial grants, but a societal belief that success through entrepreneurship is possible.

The first condition for this belief is trust in the government. Entrepreneurship is not something to attempt lightly. It is a difficult path, where founders risk their most valuable years, bear the concerns of family, take responsibility for investors' money, and endure years of sleepless nights—often without any guarantee of success. Entrepreneurs already face the immense uncertainty of the market. Added to this, if there is risk that the government may change the rules at any time or announced schedules may not be kept, who would dare to pursue entrepreneurship? Entrepreneurs do not fear regulations themselves. What they fear is the government's failure to keep its promises. Even if regulations are strict, as long as standards and schedules are clear, founders can decide whether to invest, wait, or withdraw. But when the government keeps postponing its promises, businesses are forced to shoulder costs without being able to make any decisions.

A prime example is security tokens. The Financial Services Commission announced security token guidelines in February 2023, which the market interpreted as the starting signal for legalization. Companies hired people, developed platforms, and attracted investments. Yet, related laws only passed the National Assembly about three years later, with implementation set for another year after that. In the meantime, some of the first-generation fraction-alized investment companies that pioneered the market under the regulatory sandbox either closed their operations or began liquidation procedures. Not all failures can be blamed on the government; there were limits in business potential and capital strength. However, it is undeniable that after the government promised to open the way, it failed to provide a timely bridge to the official system, causing pioneers to disappear in the interim. As cases of businesses starting based on government announcements and then leaving the market while waiting for the system to be implemented are repeated, talented people will increasingly opt for more stable paths, such as medical school or large corporations, instead of startups.

The same is true for the digital asset sector. During the last presidential election, the government promised approval of spot bitcoin exchange-traded funds (ETF), institutional participation in virtual asset trading, and the legalization of won-based stablecoins. The Financial Services Commission also announced plans to gradually allow corporate transactions and push for a Digital Asset Basic Act. However, more than a year after the administration took office, there has been little change felt by companies. Corporate participation is limited to the disposal of certain assets, and concrete timelines for spot ETFs and won-based stablecoins remain unclear. The Digital Asset Basic Act, which was said to be passed by the National Assembly in the first quarter of this year, has not even been formally submitted amid controversies over exchange ownership regulations. While the Financial Services Commission and the Bank of Korea have remained cautious for years, some companies have been liquidated and others have started seeking opportunities overseas. The remaining companies are anxiously waiting for policy decisions while bearing monthly rent and labor costs.

Meanwhile, the United States is already creating the next market. Dollar stablecoins have grown to a scale of $320 billion and are being incorporated into the regulatory sphere through the “GENIUS Act,” further strengthening the global influence of the U.S. dollar. At the same time, while Korea has spent nearly four years institutionalizing tokenization of non-standard securities, DTC—a subsidiary of the DTCC, the core U.S. securities infrastructure—plans to officially launch a service in October this year that will tokenize the Russell 1000 stocks, major ETFs, and U.S. Treasury bonds. This goes beyond non-standard assets like art or real estate; it is an attempt to place the core assets of the U.S. capital market onto the blockchain and distribute them on the global market. This is not merely a difference in technology; it is the speed at which the government decides and acts. While Korea is just debating the first step of legalization, the U.S. is already setting the standard for the next market. This difference in speed is likely to translate into growing gaps in technology, capital, and talent over time.

What entrepreneurs want is not more subsidies, but faith that the government will keep its officially announced roadmap. Policy delays are not just administrative procedures for entrepreneurs; they are matters of business survival. Policy is completed through execution, not just announcements. If businesses continue to shut down after starting based on government promises due to ongoing delays before actual implementation, no matter how much support is provided, outstanding talent will not choose entrepreneurship. The first requirement for a startup nation is not more financial aid but trust that the government's promises will be kept.

Seo Byungyoon, Co-CEO of DSRV Labs

This content was produced with the assistance of AI translation services.