“Regulatory Gaps in Virtual Assets Could Trigger Systemic Risk,” Experts Warn
U.S. Market Lacks Clear Regulatory Authority; Treasury Begins Policy Review
Bank of Korea Also Voices Concern, Urges Early Intervention Starting with Licensing

Federal Reserve Chair Jerome Powell has strongly urged the establishment of clear regulations for the cryptocurrency market, arguing that the current regulatory framework is inadequate to comprehensively govern digital asset activities. His remarks are seen as clarifying the Fed’s stance amid the rapidly evolving digital asset landscape and ongoing inflationary pressures.

Powell Stresses Regulatory Clarity on Cryptocurrencies

On June 4 (local time), cryptocurrency news outlet EtherNews reported that U.S. Federal Reserve Chair Jerome Powell strongly emphasized the need for regulatory clarity in the crypto market. Speaking at the 75th anniversary conference of the Fed’s Division of International Finance, Powell stated, “Clear rules help legitimize cryptocurrencies, drive out malicious actors, and rebuild trust.”

He pointed out that the current regulatory framework is insufficient to cover the full scope of digital asset activity, stressing the need for clear oversight encompassing stablecoins and decentralized platforms.

Powell’s stance is that such clarity is essential to restoring investor confidence across the market. Currently, multiple U.S. agencies oversee different aspects of crypto, leading to regulatory fragmentation. His remarks are seen as offering a potential path forward amid ongoing jurisdictional debates over crypto products.

This is not Powell’s first call for regulation. Just last month, he said that, "There have been numerous failures and frauds in the crypto industry in recent years, but the market is steadily becoming more mainstream. We must approach it in a way that allows for proper innovation while preserving the safety and soundness of the banking system.” He further added that, “This must not become a model that shifts incomprehensible risks to consumers or undermines the safety of the financial system.”

U.S. Treasury Eyes Global Impact of Crypto Market

Wall Street remains cautious about existing crypto policy. While the U.S. government is internally exploring expansion of crypto-related activities, many experts argue that a clearer regulatory roadmap is urgently needed.

The Financial Stability Oversight Council (FSOC) has been consistently monitoring potential risks that digital assets may pose to the traditional financial system. At a recent meeting, FSOC working groups reportedly reviewed vulnerabilities in the digital asset ecosystem and highlighted risks to financial stability arising from regulatory gaps or inconsistencies. These discussions reflect the U.S. government’s strong resolve to protect investors and preserve market integrity.

Experts believe FSOC’s current discussions will significantly influence the creation of a comprehensive U.S. digital asset regulatory framework. In particular, the key agendas of “strengthening U.S. leadership in digital assets” and “providing regulatory clarity” align with long-standing demands from industry participants. Clear regulations, they argue, can foster innovation, prevent illegal activities, and help establish the U.S. as a global leader in the digital asset space.

Bank of Korea Calls for Early Oversight of KRW-Based Stablecoins

Meanwhile, the Bank of Korea (BOK) shares similar concerns. Last month, Ko Kyung-chul, Head of BOK’s Electronic Finance Team, stated at the Korean Financial Law Association conference that, “If Korean won-based stablecoins are to be permitted, the BOK must be involved from the licensing stage.”

Ko stressed that stablecoins significantly affect monetary policy and financial stability. Direct central bank involvement in the licensing process is necessary to minimize adverse impacts on central bank operations.

Currently, KRW-based stablecoins are not legally permitted in South Korea. Ko emphasized the need to design legislation that supports a stable and sustainable digital payments ecosystem, adding that it would be ideal for the BOK to oversee a future financial ecosystem that includes central bank digital currencies (CBDCs), deposit tokens, and stablecoins. This signals a shift from the BOK’s earlier cautious stance. BOK Governor Rhee Chang-yong last May stated that, "We must first decide whether to allow KRW-based stablecoins at all.”

Amid these discussions, some observers anticipate future jurisdictional conflicts between financial and monetary authorities over stablecoin oversight. A draft of the “Digital Asset Basic Act”, recently released by Democratic Party lawmaker Min Byung-deok, designates the Financial Services Commission (FSC) as the licensing authority for stablecoins.

Currently, the Korean government is preparing Phase 2 crypto legislation, which includes stablecoin regulations, through the Virtual Asset Committee chaired by FSC Vice Chair Kim So-young. The committee includes representatives from the FSC, Financial Supervisory Service, Ministry of Economy and Finance, Ministry of Justice, and Ministry of Science and ICT.

One senior financial regulator confirmed that they are currently preparing detailed Phase 2 provisions for stablecoins and related digital assets. They are aiming for implementation in the second half of this year as scheduled.

“Tax Cuts Criticized as Fatal to Fiscal Health”
Paradoxical Fiscal Structure: Increased Spending, Decreased Revenue
Public Criticism from Economic Leaders like Elon Musk

As the U.S. national debt surpasses USD 36 trillion, President Donald Trump is simultaneously pushing forward two controversial policies—tax cuts and the abolition of the debt ceiling—stoking fears of deepening economic instability. His tax cut plan, a key pledge since his candidacy, is projected to add USD 24 trillion in additional debt over the next decade. Trump’s proposal to eliminate the debt ceiling altogether has sent shockwaves through the markets. In response, business leaders and market experts—including Tesla CEO Elon Musk—have voiced strong opposition, arguing that “what’s needed now is structural reform, not tax cuts.”

Market-Friendliness Over Fiscal Stability?

On 4th June (local time), The Wall Street Journal (WSJ) reported that the U.S. national debt reached USD 36 trillion, equivalent to 122% of the country’s GDP. The corresponding annual interest payments now exceed USD 1 trillion. WSJ warned of deteriorating fiscal conditions and Washington’s “irresponsible budget management,” citing multiple expert opinions.

Peter Orszag, CEO of Lazard and former Director of the Office of Management and Budget under President Obama, stated in a recent interview, “Those who warned about unsustainable deficits and debt in the past were like the boy who cried wolf. But now, the wolf is truly circling us.” Hedge fund titan Ray Dalio added starkly, “The U.S. economy likely has no more than three years to avoid a heart attack.”

Amid these warnings, President Trump’s proposed tax cuts are expected to worsen the fiscal situation. The Congressional Budget Office (CBO) recently reported that if Trump's tax policies are implemented, the federal debt could grow by over USD 24 trillion over the next decade. This would not only exacerbate fiscal deterioration but could also directly threaten the U.S. credit rating.

Trump’s proposed tax cuts—focused on corporate tax reductions and income tax relief—are seen as an extension of his pro-market ideology. However, experts largely view the plan negatively, noting that even short-term economic benefits are uncertain and that the cuts would likely deepen long-term structural fiscal imbalances. With inequality worsening in the post-COVID era, many argue that tax breaks for the wealthy could spark political backlash, erode consumer confidence, and undermine trust in public policy.

Concerns Grow Over U.S. Credit Rating and Dollar Credibility

Amid mounting criticism, Trump has intensified the controversy by calling for a complete abolition of the federal debt ceiling. On June 4, he wrote on his social media platform Truth Social, “To prevent economic disaster, the federal debt ceiling must be eliminated entirely. If the debt ceiling issue isn’t resolved smoothly, it could cause catastrophic damage to the U.S. and the world.”

He even cited Democratic Senator Elizabeth Warren as being in agreement and urged bipartisan cooperation between Republicans and Democrats.

The U.S. Congress currently imposes a statutory debt ceiling to maintain fiscal discipline. The current cap is USD 36.1 trillion, and once that limit is reached, the federal government can no longer raise funds to repay existing debt—potentially triggering a default. While the Treasury Department has been using extraordinary measures to delay this outcome, failure to raise or suspend the limit will eventually result in default.

Trump’s proposal to abolish the ceiling is interpreted by many as a willingness to expand government spending without restraint, fueling fierce backlash. Critics argue this is an irresponsible move, especially as the debt burden nears critical levels. One financial industry official stated, “Pursuing tax cuts and spending increases simultaneously—without improving the fiscal balance or boosting revenue—undermines long-term sustainability. If confidence in the federal government’s solvency erodes, even the dollar’s status as the global reserve currency could be challenged.”

Trump’s Political Calculations Collide with Market Concerns

Elon Musk, CEO of Tesla, also slammed Trump’s tax proposal, posting on X (formerly Twitter) on June 4 stating, “KILL the BILL. Driving America into bankruptcy is unacceptable. Any new spending bill must not massively expand deficits or raise the debt ceiling by USD 5 trillion.”

Musk argued that unchecked spending would make the U.S. a slave to debt.

He had also posted or shared over ten posts the previous day criticizing Trump’s economic proposals. “Sorry, but I can’t stay silent anymore,” Musk wrote. He further posted, “This bloated, outrageous, fat-laden spending bill is disgusting and appalling.”

His comments seemed to mock Trump’s own characterization of the tax package as a “big, beautiful law.” Observers note that Musk—who left the White House advisory council last month—appears to be positioning himself in direct confrontation with Trump.

Chinese Conglomerates Shift IPO Destinations
CATL’s Successful Listing Serves as Catalyst
Dual Listings Surge as Capital Raising Accelerates

Chinese conglomerates are shifting their IPO stage from the mainland to the Hong Kong stock market. The successful listing of CATL in Hong Kong this past March, recorded as the world’s largest IPO, has ignited strategic changes among corporations. Major companies such as SHEIN are now also pushing forward with plans for a Hong Kong IPO. The Chinese government is actively leveraging the Hong Kong exchange to attract foreign capital and enhance funding flexibility. Meanwhile, it is becoming increasingly common to see companies already listed on the mainland A-shares market pursuing dual listings in Hong Kong.

A More Favorable IPO Environment Compared to Mainland and Western Markets

On the 4th of June (local time), Bloomberg reported that the total amount raised from IPOs and additional share sales in Hong Kong so far this year has reached USD 26.5 billion. This marks a 597% increase compared to the same period last year (USD 3.8 billion), making it the largest volume since the market's 2021 peak. As capital flows in, the Hang Seng Index has rebounded past the 23,000 mark. From its low on April 7, affected by the U.S.-China tariff war, it recovered by 19.83% as of June 3.

The fact that several major Chinese companies are preparing IPOs adds optimism to this recovery trend. Fast fashion giant SHEIN abandoned its plan for a London IPO and opted for Hong Kong instead. Although it had received listing approval from the UK’s Financial Conduct Authority (FCA), it failed to secure clearance from Chinese regulators.

Market observers say it’s not surprising that Chinese authorities withheld approval for a London IPO given international scrutiny of SHEIN. The company faced controversy last year for allegedly forcing workers, including minors, to work 16-hour days and withholding wages. Additionally, lower-than-expected performance raised concerns: SHEIN's 2023 revenue was USD 38 billion, significantly short of the USD 45 billion target.

China’s largest steel e-commerce platform, Zhaogang, succeeded in its second attempt to go public in Hong Kong. Its first try in August 2018 failed, but this time, factors like increased commission-generating brokerage trades, logistics and supply chain services, tailored steel solutions for SMEs, and overseas expansion potential helped secure investor confidence. Although its opening price was USD 1.30, the stock fell to USD 1.01 due to broader real estate and steel market challenges before rebounding to close at USD 1.30.

Greater Access to Global Capital than Shanghai

A pivotal moment in Hong Kong’s IPO rebound was the blockbuster listing of CATL, China’s largest battery manufacturer. On March 20, CATL raised USD 4.6 billion on the Hong Kong exchange, completing the world’s largest IPO of the year. Although there was some controversy around ties to the military and alleged human rights issues, the process went smoothly under strong backing from Chinese authorities.

CATL announced plans to invest the IPO proceeds—about USD 7.3 billion—in building a battery manufacturing plant in Hungary. This facility aims to expand supply to major European automakers like BMW, Stellantis, and Volkswagen. As of 2024, CATL holds a 38% share in the global EV battery market, and the European investment is expected to accelerate both regional diversification and client base growth.

This strategy aligns with Beijing’s broader industrial policy. CATL is a flagship in China’s push to dominate the EV battery sector, and its IPO symbolizes the state's strategic use of capital markets. The fact that Hong Kong-raised funds are being funneled back into mainland industry reveals a deliberate “dual structure” strategy by the Chinese government, using both domestic and offshore markets.

Government-Backed ‘Dual Strategy’ Gains Momentum

Following CATL’s lead, dual listings are emerging as a trend among Chinese firms. Companies already listed on the mainland A-share market are increasingly turning to Hong Kong to attract foreign capital. One example is Hengrui Medicine, a leading pharmaceutical company on the mainland, which plans to raise at least USD 2 billion through a Hong Kong IPO this year.

As seen with CATL, these moves aren’t just corporate decisions—they’re closely tied to Chinese government policy. With continued stagnation in the mainland capital market, the government is using Hong Kong as a secondary route for attracting foreign investment and securing funding. It’s a form of risk diversification and a workaround to stay linked with global markets. Unlike Shanghai or Shenzhen, Hong Kong offers greater accessibility for Western capital and more flexible regulations, reducing the burden on companies.

This backdrop is fueling expectations for a broader Hong Kong market recovery. In South Korea, individual investors known as “Chung-hak ants” (retail investors in Chinese stocks) are renewing interest in Hong Kong equities, while institutional investors are closely watching heavyweight stocks like CATL and Zhaogang. With trading volume and foreign capital inflows clearly rising, analysts believe a combination of regulatory flexibility and policy support could accelerate a mid- to long-term revival.

However, uncertainty remains as to whether these optimistic projections will materialize. Distrust from the U.S. and other Western nations persists, and issues like accounting transparency, disclosure standards, and control risks still pose challenges. Even with strong backing from Beijing, some experts caution that without restoring confidence among global investors, the Hong Kong funding channel may struggle to take firm root over the long term.

The proportion of consumption in disposable income is decreasing.
Stagnant real income is weakening consumers’ spending power.
The root cause is industrial collapse and entrenched low growth.

A recent study suggests that the prolonged economic downturn in South Korea may be due to changes in consumer spending patterns. According to this view, underlying today’s economic slump are broader shifts in demographics, income levels, and consumer sentiment across Korean society. However, critics argue this interpretation misses the real point. They contend the core issue lies in the collapse of the consumption base itself — and unless this is acknowledged, no fundamental solution can be found.

A Shift in Consumer Trends Focused on Experience and Value

According to the Korea Chamber of Commerce and Industry (KCCI) on June 4, the average propensity to consume (APC) among Korean consumers dropped from 73.6% in 2014 to 70.3% in 2024 — a 3.3 percentage point decline. This decline was observed across all age groups: those under 30 (from 73.7% to 71.6%), people in their 40s (76.5% to 76.2%), 50s (70.3% to 68.3%), and 70s (79.3% to 76.3%). Notably, the sharpest drop occurred among those in their 60s, from 69.3% to 62.4%. The APC is calculated by dividing total consumption expenditure by disposable income.

The structure of consumption has also changed. Based on household trend surveys by Statistics Korea, this report analyzed income, consumption, and APC by age group over the past decade. Categories where spending shares increased include healthcare (from 7.2% to 9.8%), entertainment and culture (5.4% to 7.8%), food and lodging (13.7% to 14.4%), and housing and utilities (11.5% to 12.2%). In contrast, spending on traditional necessities such as food and beverages (15.9% to 13.6%), clothing and footwear (6.4% to 4.8%), and education (8.8% to 7.9%) decreased.

The report emphasized that these changes go beyond consumption behavior and could impact the overall industrial structure. Jang Geun-moo, head of KCCI’s Distribution and Logistics Promotion Institute, said, “Weak consumption isn’t just a result of recession, but reflects societal changes in demographics, income, and psychology. That’s why short-term stimulus measures have limited impact.” He stressed the need for customized policies by generation to restore long-term economic vitality.

The “Consumer Blame” Frame Is a Distorted Interpretation

Experts, however, disagree with the idea that changes in consumer behavior are to blame. Instead, they point to more fundamental causes — chief among them, the decline in household income driven by weakened exports. South Korea's manufacturing-based export sector, a backbone of the economy, has suffered in recent years from sluggish global demand and declining price competitiveness. As corporate earnings shrank, so did workers' incomes, reducing their capacity to spend.

According to the Ministry of Employment and Labor, average real monthly wages per worker dropped by 2.5% in 2023 and 1.7% in 2024, to USD 2,666 and USD 2,734, respectively. While wages in the first quarter of 2025 rose 2.3% year-on-year to USD 2,782, this increase merely reflects the fact that nominal wages rose 4.5% while the consumer price index rose only 2.1%. Experts warn that this is vulnerable to rapid change depending on inflation trends.

This pattern is clearly reflected in GDP figures. In Q1 of this year, the South Korean economy shrank by 0.2% due to weak domestic demand alone. Without a rebound in exports, most forecasts predict continued sluggish growth in Q2. The Bank of Korea noted that “rising uncertainty over trade conditions due to U.S. tariff policies is hindering recovery in investment and consumption,” adding, “In the current environment, it is difficult to present an optimistic outlook for exports and growth.”

An Export-Driven Economy Can’t Rely on Domestic Demand Alone

There is growing agreement that the real issue is structural low growth caused by the collapse of key industries. The fall of the petrochemical sector is a stark example. Due to falling global oil prices, oversupply, and aggressive pricing from Chinese and Middle Eastern competitors, South Korea’s petrochemical exports dropped by over 20% in 2024. This has directly eroded the profitability of domestic manufacturing, weakening the overall industrial base. Once considered a “star industry,” petrochemicals have now become a drag on the broader economy.

Worryingly, this trend isn’t limited to petrochemicals. Key export industries such as semiconductors, steel, and displays — once the pillars of Korea’s economy — are now losing ground in both technology and price competitiveness. Though South Korea was once dubbed a “hardware powerhouse” in the early 2010s, concern is mounting that it is now losing its innovation engine.

The seriousness of this industrial weakening lies in its link to entrenched low growth. Slumping exports lead to worsening corporate performance, which results in reduced hiring and stagnant wages, in turn shrinking consumer spending. This creates a vicious cycle of weaker domestic demand and falling growth rates. While the government is attempting to respond with policy measures, the prevailing view in the industry is that short-term fiscal injections alone cannot revive industries that have already lost technological and price competitiveness. It is no longer a matter that can be resolved by tax breaks or deregulation alone.

This is why concerns are rising that the prolonged slump in domestic demand and weakened consumption are symptoms of a deeper, simultaneous crisis in income and industry. The issue is not simply a shift in consumer preferences — it’s that the foundation for consumption has collapsed. Experts argue this is not a temporary downturn but a structural crisis that could repeat unless the economic system is fundamentally restructured. Increasingly, attention is turning away from “changing consumption patterns” toward the more fundamental problem: the collapse of South Korea’s industrial structure.

Race to Capture the ‘Aviation Boom’ Originating from India
Economic growth, population increase, and surging travel demand
High institutional barriers such as foreign investment restrictions

India is stepping into the global spotlight as one of the most promising growth markets in aviation. Once overlooked due to its deep reliance on rail transport and underdeveloped airport infrastructure, the country is now undergoing a dramatic transformation. This change is fueled by ambitious fleet expansions, rising domestic demand, and a strategic push by the government to overhaul and expand aviation infrastructure. As both global airlines and aircraft manufacturers race to capture a slice of this rapidly evolving market, India is being hailed as the “land of opportunity” for the aviation industry. But along with this promise comes a sobering reality: growth in India’s aviation sector is far from straightforward. Behind the potential lies a labyrinth of regulatory hurdles, logistical bottlenecks, and infrastructure deficiencies that pose significant challenges to those hoping to stake a long-term claim.

Fleet Orders Skyrocket as India Expands Its Aviation Footprint

At the heart of India’s aviation boom is an extraordinary wave of aircraft purchases by major local carriers. Air India, backed by the industrial powerhouse Tata Group, is negotiating with both Boeing and Airbus for the procurement of approximately 200 single-aisle aircraft—a clear signal of its aggressive growth strategy. This follows a historic 2023 deal in which the airline placed orders for 250 aircraft from Airbus and 220 from Boeing, totaling an eye-popping 470 aircraft. The momentum didn’t stop there; last year, the carrier added another 100 Airbus jets to its growing fleet, reinforcing its transformation into a major global player.

Not to be outdone, low-cost behemoth IndiGo—India’s largest airline by market share—has been expanding at an equally impressive pace. Having signed the largest single commercial aircraft order in aviation history in 2023 with 500 Airbus narrow-body aircraft, IndiGo continues to build out its long-haul capabilities. The airline ordered 30 Airbus A350-900 wide-body jets last year and mirrored that commitment again this year, demonstrating its intent to go beyond regional dominance and compete on long-distance international routes.

This surge in aircraft orders underscores the carriers’ confidence in India’s growing demand for air travel. But their ambition would be futile without infrastructure to support it—and this is where the Indian government steps in. Since 2014, India has doubled its number of operational airports, expanding from 74 to 157. Plans are in place to increase that number to 400 by 2047, marking the centennial of India’s independence. The government’s aviation strategy aligns with India’s broader economic trajectory: amid a global slowdown caused by protectionist trade policies—such as U.S.-imposed tariffs—India is increasingly becoming a go-to destination for manufacturing relocation. This reshoring wave is expected to further stimulate business travel and cargo needs, adding to the already strong consumer demand for domestic and international flights.

India’s Skyward Ascent: Vast Potential in a Low-Flying Market

Despite its ranking as the third-largest aviation market in the world—trailing only the United States and China—India's per capita air travel rate is surprisingly low. Each Indian takes just 0.12 flights per year, compared to China’s 0.46. This stark gap is rooted in the country’s historical dependence on railways, which still serve as the backbone of national transportation. Yet this underutilization highlights the tremendous untapped potential of the Indian aviation market.

The International Air Transport Association (IATA) projects India’s aviation sector to grow at an average annual rate of more than 7% over the next two decades. This bullish forecast is supported by several reinforcing trends: a steadily expanding economy, a ballooning population, and rising consumer aspirations. India’s middle class is not just growing—it’s becoming more mobile, and more willing to travel for work, education, and leisure. As the country continues to bolster its GDP through IT, manufacturing, and services, increased disposable income and urban migration are expected to fuel further growth in air travel.

For global aviation companies, this scenario is nothing short of a goldmine. A country with the size of Europe and a growing population eager to travel more and farther is precisely the environment airlines and aircraft makers dream of. India’s demographic profile—young, mobile, and increasingly affluent—makes it an unparalleled growth engine. Yet, as they rush to take advantage of this market, international stakeholders are discovering that India’s takeoff comes with turbulence.

The Hard Ground Realities: Infrastructure and Regulation Remain Major Hurdles

Even as demand soars and investments pour in, there is growing consensus that India’s aviation transformation will be neither swift nor smooth. The most immediate challenges come from the regulatory environment, which remains difficult for foreign players to navigate. Restrictions on foreign direct investment in airlines, a convoluted and bureaucratic route allocation policy, and inconsistent licensing and safety regulations create formidable barriers to entry and operations for global carriers.

Moreover, the supporting infrastructure simply hasn’t kept pace with the scale of investment and ambition. While progress has been made in major metropolitan areas, regional airports remain outdated. Air traffic control systems are still operating on antiquated technology, contributing to flight delays and inefficiencies. There’s also a critical shortage of airport slots, hangars, and maintenance facilities. The result is a system where even the newest aircraft may sit idle or be deployed inefficiently due to bottlenecks on the ground. Airline operators voice growing concerns that delays, overcapacity, and chaotic airport management could undercut their profitability.

Operational challenges don’t end there. India’s labor laws and safety regulations vary widely from international standards, adding another layer of complexity for foreign airlines and aircraft manufacturers. Differences in the qualifications required for maintenance crews, inconsistent pilot certification standards, and varying airport security protocols translate into high adaptation costs. For aircraft manufacturers, this regulatory and technical fragmentation poses a unique challenge in localizing maintenance, repair, and technical support services after delivery.

These challenges are not just operational annoyances—they are potential dealbreakers. Without systemic regulatory reform and robust investment in infrastructure, the gap between expectations and execution could grow wider. IATA itself noted this delicate balance, stating that while India is viewed with great hope by global stakeholders, that optimism is tempered by caution. For India to fully establish itself as a global aviation leader, it must overcome two defining challenges: regulatory reform and infrastructure development. Until then, India will remain a land of unmatched opportunity—but also one of unrelenting trials.

Europe’s Lost Engine of Economic Growth
Stagnant Innovation Infrastructure Slows Corporate Expansion
Lack of Global Tech Giants Hampers Economic Momentum

Once a powerhouse of scientific progress and industrial ingenuity, Europe is now falling behind in the global race for technological and economic dominance. As the United States forges ahead with aggressive investments in innovation and a culture that embraces risk and disruption, Europe finds itself mired in hesitation—held back by chronic underinvestment, overregulation, and a risk-averse mindset that stifles bold entrepreneurship. While American firms scale rapidly and dominate emerging sectors, European companies struggle to grow beyond their early stages. This stagnation is not just a concern for policymakers—it represents a looming crisis that threatens the continent’s future prosperity.

Recent analysis has laid bare the extent of Europe’s decline in technological competitiveness. Despite having access to world-class research institutions and a deep well of talent, Europe is failing to translate its intellectual capital into economic power. The result is an innovation gap that is widening rapidly—one that leaves Europe increasingly vulnerable in an era where knowledge, speed, and scalability define global influence.

A Widening Gap with the United States

Nowhere is this divide more apparent than in the startup ecosystem. The United States has become a dominant force in nurturing so-called unicorn companies—privately held startups valued at over USD 1 billion. As of April 2025, the U.S. had 702 such firms with a staggering total valuation of around USD 3.2 trillion. Europe, despite its size and resources, trails with approximately 600 unicorns across the continent. But numbers alone don’t tell the full story; while Europe's unicorn count may seem close, their combined valuation is a mere USD 330 to 400 billion—only a fraction of what American firms are worth.

Even more concerning is Europe’s inability to scale its most promising companies into globally dominant players. According to research by MIT Sloan School of Management professor Andrew McAfee, the United States has 241 publicly traded firms under 50 years old that are each valued at over USD 10 billion, with a combined value nearing USD 2.96 trillion. In stark contrast, the entire European Union has produced only 14 such companies, worth just USD 430 billion in total. This data reflects a deeper issue: European startups often plateau before reaching their full potential, lacking the growth runway, market momentum, or capital necessary to compete on a global scale.

Part of this failure stems from a fundamental difference in business culture. In the U.S., the prevailing model prioritizes rapid growth, even at the expense of short-term profits. This “growth-first, profit-later” philosophy allows companies to capture market share, attract talent, and innovate aggressively. In Europe, however, entrepreneurs are expected to show stability and profitability early on—a demand that hampers risk-taking and limits long-term ambition. The result is a business environment that values caution over disruption, and sustainability over scale, which is increasingly at odds with the dynamics of the global tech economy.

Chronic Investment Deficits and Cultural Barriers

At the heart of Europe’s struggles is a persistent shortfall in investment, particularly in venture capital and research and development. The continent’s venture capital industry is only about one-fifth the size of that in the United States. Between 2014 and 2024, Europe attracted USD 425 billion in tech investments—a significant sum, but one that remains dwarfed by American standards. This disparity is not merely a function of scale; it also reveals structural weaknesses in how Europe’s financial systems operate.

European capital markets are less evolved, with limited avenues for high-growth funding. Around 31 percent of household assets across the continent are locked in cash or deposits, a stark contrast to the U.S., where only 12 percent of assets are held in such low-risk forms. American households, by contrast, channel a far greater share of their wealth into stocks, bonds, and funds that support innovation. As a result, the flow of growth capital in Europe is restricted, making it harder for startups to secure funding at critical stages of development. Many of these companies ultimately seek capital elsewhere, often moving to the U.S. where investor appetite is more aggressive and resources more abundant.

The same trend is evident in R&D spending. From 2007 to 2023, the United States increased its research and development investment by more than 80 percent, from USD 461.8 billion to USD 823.1 billion. Europe, in the same timeframe, managed only a 50 percent increase. Although European governments invest similar amounts per capita in R&D as the U.S., the contribution from the private sector is substantially lower. This imbalance limits the ability of European researchers and companies to push the boundaries of innovation. Compounding the issue is the rapid ascent of China, which has not only surpassed the EU in R&D spending but is also accelerating its efforts to dominate critical technologies.

Beneath these investment gaps lies a more subtle yet powerful cultural barrier. European investors, entrepreneurs, and institutions are widely known for their aversion to risk. Compared to the U.S., where failure is often viewed as a learning experience and a stepping stone to future success, Europe treats business failure with a far heavier stigma. This creates a climate in which risk-taking is discouraged, and caution is rewarded. Such a mindset is not conducive to breakthrough innovation. Without the willingness to embrace uncertainty and failure, it becomes nearly impossible to achieve the kind of disruptive success stories that fuel economic transformation.

Regulation, Brain Drain, and a Shrinking Horizon

Beyond investment shortfalls and cultural caution, Europe’s regulatory landscape presents yet another hurdle to growth. While the continent has led the world in creating frameworks for digital governance, these laws often have unintended consequences. The General Data Protection Regulation (GDPR), the Digital Markets Act (DMA), and the Digital Services Act (DSA) are designed to protect consumers and ensure fair competition. However, they also impose significant compliance burdens, especially on startups and scale-ups that lack the legal teams and financial resources of established corporations. Ironically, the regulations that were meant to create a fairer playing field often end up entrenching the dominance of the very firms they aim to regulate—usually large American tech companies.

Innovation infrastructure is another critical weakness. Unlike the United States, which benefits from a concentrated and highly networked innovation hub in Silicon Valley, Europe lacks a comparable ecosystem. The continent has no single location where capital, talent, mentorship, and infrastructure converge at scale. Furthermore, the network of relationships between successful entrepreneurs and new startups is thin, making it harder to replicate success or foster serial entrepreneurship. In places like the U.S., Israel, and China, large-scale startup exits and rapid reinvestment cycles are common. In Europe, they are the exception.

The effects of this fragmented system are profound. Europe is experiencing an escalating brain drain as its top talent and most promising startups head abroad in search of funding, support, and growth opportunities. Companies such as Skype and DeepMind began in Europe but were eventually acquired by U.S. tech giants, stripping the continent of both innovation and economic value. This is not an isolated phenomenon—it reflects a systemic inability to retain the intellectual and entrepreneurial capital needed to drive long-term growth.

In the most severe cases, promising firms don’t just leave—they collapse. German air taxi startup Lilium filed for bankruptcy in October 2024, was delisted from the Nasdaq, and laid off around 1,000 employees just two months later. Its competitor in the same sector, Volocopter, also initiated bankruptcy proceedings in December 2024 after months of financial instability. These back-to-back failures of deep-tech pioneers highlight the fragility of Europe’s startup environment and the structural vulnerabilities that even its most high-potential firms cannot escape.

Experts are sounding the alarm. For Europe to reclaim its global influence and remain competitive in the decades to come, it must undergo a fundamental transformation. The continent needs a cohesive strategy that can knit together fragmented markets, loosen restrictive regulations, and open the floodgates to capital investment. It must rebuild its innovation ecosystems from the ground up, offering ambitious entrepreneurs not just funding but mentorship, infrastructure, and room to fail. Above all, Europe must find ways to attract and retain its brightest minds, lest they continue to seek opportunity elsewhere.

Time is running short. The EU’s nominal GDP is already one-third smaller than that of the United States, and its growth rate over the past several years has hovered at just a third of America’s pace. Without urgent, coordinated reform, Europe risks not only falling further behind—but being left out of the future entirely.

Demand base for fractional art investment remains weak.
It is increasingly seen as an "illiquid asset."
Authorities focus more on regulation than market development.

The fractional art investment market has effectively come to a halt amid repeated subscription shortfalls and institutional limitations. As major platforms’ ambitious public offerings all record poor results, and the government’s token securities (STO) institutionalization faces delays, uncertainty continues to grow. Structural issues such as investment limits for general investors, lack of tax benefits, and low liquidity are emerging one after another, causing trust in the market itself to collapse.

Market reaction lukewarm despite investors’ enthusiasm

According to the investment industry on the 4th, all fractional art investment offerings conducted in Korea this year have failed to attract sufficient subscriptions, resulting in subscription shortfalls. A representative example is the ‘Pumpkin’ offered by Yeolmae Company. The investment contract securities (ICS) for Yeolmae Company 4-1, based on the artwork of the same name by globally renowned Japanese installation artist Yayoi Kusama, faced a shortfall of 3,328 shares out of a total offering of 7,400 shares. Considering that 10% of shares are preferentially allocated to joint business operators, the actual subscription rate falls below 50%.

Yes24’s subsidiary Artipio, which recently entered the fractional art investment market, also experienced failure in its first offering. Artipio held a subscription for its first ICS in February, based on David Hockney’s 2021 iPad drawing artwork, ‘30th May 2021, From the Studio.’ Out of a total issue amount of USD 530,054.85 (72,000 shares) were subject to subscription, but the subscription rate was only 39.34%. As a result of the subscription shortfall, Artipio absorbed 64.59% of the total offering, equivalent to USD 370,913.00 (50,380 shares).

Multiple causes have contributed to the sluggish subscription rates. From an investor’s perspective, art is fundamentally a difficult asset to realize returns from. Unlike securities, prices do not reflect changes quickly, and as a physical asset, liquidity is low. Moreover, the timing of capital recovery is unclear, and there is significant uncertainty in valuing the artworks. Especially in an environment where investors cannot see the actual works and only acquire partial ownership, the investment model is viewed as unattractive.

Institutional deficiencies and regulations hinder progress

The absence of a solid institutional framework and the government’s passive stance are also cited as obstacles to activating the fractional art investment market. Notably, the core framework of fractional investment, token securities (STO), still lacks a clear roadmap. Although the Financial Services Commission (FSC) has mentioned STO activation for years, concrete strategies and infrastructure development remain insufficient. Consequently, fractional investment platforms operate amid legal uncertainty, leaving investors uneasy about committing funds.

Current regulatory conditions further dampen investor willingness. The subscription limit for general investors in fractional investment products is capped at USD 22,079.77 per person, and investors cannot receive securities exceeding this amount. This leads to a market dominated by professional investors rather than the general public. Restrictions introduced to protect investors from risk ironically act as barriers to market growth.

Experts agree that these regulations prevent the creation of a market where digitized real assets such as art or real estate can be freely traded. The essence of fractional investment products lies in tradability and liquidity. However, with secondary markets and liquidity channels failing to function properly, investors face a ‘lock-in’ scenario where they can enter but find it difficult to exit. The fractional investment model, once hailed as a new industry, has been left stranded without institutionalization, resulting in lost opportunities for investor protection, business support, and market growth.

Securities firms struggle with regulatory barriers

Some securities firms have attempted to tap the fractional investment market as a new revenue source. For example, ‘Project Pulse,’ launched in March last year by Shinhan Investment Corp, SK Securities, and blockchain developer Blockchain Global, aims to provide STO issuance, distribution infrastructure, and consulting by running a blockchain financial infrastructure pilot project for fractional investment and innovative financial service operators.

Around the same time, Kyobo Securities signed a business agreement with LucentBlock, operator of the real estate fractional investment platform ‘Soyu.’ Hana Securities also partnered with Print Bakery, LucentBlock, Pinnacle, and Oasis Business on fractional investment services. Korea Investment & Securities signed agreements with art platform operator Abitus Associates (‘Artu’) and stockkeeper StockKeeper, which runs the Hanwoo fractional investment platform ‘Bangcow.’

Securities firms’ interest in STO stems from viewing token securities’ distribution as a new business opportunity, including transaction fee revenue. According to Hana Financial Management Research Institute, Korea’s STO market is expected to grow from USD 25 billion this year to USD 270 billion by 2030. Fractional art investment, distinct from traditional financial assets, has gained attention as a premium alternative investment and a means to attract younger investors and enhance brand image.

However, repeated subscription shortfalls and structural challenges have prevented these positive prospects from translating into market expansion. Seoul Auction Blue’s fractional art investment service ‘Sotu,’ partnered with four securities firms including KB Securities, Mirae Asset Securities, SK Securities, and Shinhan Investment Securities, conducted its 8th offering last year based on Andy Warhol’s ‘Dollar Sign.’ The subscription rate was 86.9%, but investors pulled out en masse just before payment, resulting in a dismal outcome.

This too is seen as a consequence of regulatory barriers. Fractional investment is essentially based on tokenized physical assets, but without legal and technical infrastructure to support it, the product’s credibility inevitably suffers. Financial authorities consider fractional investment platforms as securities asset exchanges but have not established separate approval and management systems, leaving both operators and investors in an ambiguous state, market participants consistently say.