Asian countries were aligning their AI rules with the EU’s governance-led model or the American innovation-based approach or adopting elements of both, Sucharzewska said.

Singapore followed a voluntary and principles-based approach closer to the US model to build its governance framework for agentic AI, or autonomous AI, while South Korea’s AI Basic Act was aligned with the EU legal framework, she said.

This fragmentation in AI governance has arisen due to the absence of a global consensus on the technology, a divide that is accelerating, according to Sucharzewska.

A Fitch report released last week on global AI regulation says the Gulf Cooperation Council – comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – follows a light-touch governance model and has emerged as an alternative to the EU’s “prescriptive approach”.

While the Middle East was increasingly being seen as an important region for AI adoption, the biggest challenge for Asian companies was meeting the “dual compliance” requirements of the EU and the US and different market demands, said Anndy Lian, a Singapore-based adviser to governments on blockchain and information technology.

Consequently, these companies had to bear the burden of a “regulatory fragmentation tax” and a “costly paradox”, Lian said.

“This friction splits Asian research and development down the middle. Instead of focusing capital on core model breakthroughs, Asian start-ups must bleed resources into engineering hyper-localised” solutions for compliance, he added.

Raj Kapoor, president of the India Blockchain Alliance, said that navigating divergent rule books was imposing a disproportionate burden on Asian companies, many of which were creators of AI-enabled products as well as major consumers of Western AI technology.

Lian said that apart from hurting competitiveness, “the danger is that Asian AI plans will become structurally fractured, building Balkanised versions of the same technology to satisfy Western regulators”.

According to Lian, some Asian countries are leaning towards the US approach. Prioritising “ironclad guardrails” through regulations, such as in the EU, over developing technological capability was “an expensive luxury they cannot afford”, he said.

“The core of the dilemma is that Asia relies heavily on the US for bleeding-edge AI infrastructure, yet looks to Europe as a massive consumer market for its digitised products and services,” Lian said.

The implications of regulatory compliance would have a broader economic impact beyond technology, said Raj Kapoor, president of the India Blockchain Alliance.

The World Economic Forum (WEF) said in November that the next phase of Southeast Asia’s digital economy would be powered by AI across all sectors.

“Alongside physical infrastructure, robust AI regulation and governance frameworks are paramount. These policies must strike a careful balance: encouraging innovation while establishing clear ethical guidelines to build and maintain the necessary consumer trust,” the WEF said.

According to a McKinsey report released in February, 46 per cent of Southeast Asian businesses have moved beyond the pilot phase of AI adoption, surpassing the global average of 35 per cent.

The choice of regional countries in adopting the US or the EU AI regulatory framework would ultimately reflect their geopolitical stance within the global tech nexus.

“For Asian governments, selecting a regulatory framework is rapidly evolving from a technical policy decision into a defining geopolitical statement, one that may determine not only economic opportunity but also their place in the architecture of the future digital world,” Kapoor said.