Rapid Advances In AI Pose Opportunity And Risk For Startups

Rapid advances in artificial intelligence and blockchain technology are forcing policymakers around the world to catch up. From debates over AI ethics and data privacy to new frameworks for crypto assets, the rules of the game are being written in real time. For startups, this creates both enormous opportunity and significant risk. Get it right, and you might set the global standard. Get it wrong, and you could face costly pivots or worse, regulatory dead ends.

“Sometimes compliance is a moat. Other times, it's just good hygiene. My advice: Assess your risk honestly,” Saksham Kukreja, co-founder of Bitgrit, told Khaleej Times. With years of experience building at the intersection of AI and blockchain, Kukreja has guided his company through complex global regulations and recently led Bitgrit to establish the first licensed entity for tokenizing AI assets under ADGM.

Excerpts from an interview:

Why has regulatory engagement been a key part of your strategy? Is it required for all startups in emerging tech?

For us, regulatory engagement was never optional. Building at the intersection of AI and Web3 means facing questions about data privacy, model ownership, and public trust from day one. Customers want to know their information is safe, developers care about their IP, and token holders want real governance not just promises.

That's why at Bitgrit, we chose a path that was slower but more sustainable: we set up a regulated DLT Foundation instead of launching as an unregistered protocol. It was never just about ticking boxes but about proving that there are real standards and accountability behind what we're building. That approach helped us win clients like NASA and SoftBank and attracted over 40,000 AI developers. People want to participate in ecosystems that feel legitimate and durable.

But this isn't the only way. If you're building a low-risk SaaS tool or an internal product, you might not need deep regulatory engagement. But the closer your tech comes to people's data, money, or infrastructure, the more essential that engagement becomes. Sometimes compliance is a moat. Other times, it's just good hygiene. My advice: Assess your risk honestly. If the future of your company could hinge on a single policy change, build relationships with regulators early. For us, it was the difference between being a flash in the pan and building something that lasts.

With technology evolving so quickly, do you think policymakers can realistically keep up with the pace of innovation in AI and Web3?

Honestly, keeping up is nearly impossible. Startups move at sprint speed - we build, ship, and iterate in weeks. Policymakers are marathoners. Their job is to protect the public and keep the rules clear, so they have to pace themselves. The danger is that this inertia can sometimes push entire industries to pack up and leave for friendlier ground. I saw this up close in Bitgrit's early days, when friends in crypto moved their projects to other jurisdictions with clearer rules, sometimes overnight.

But not all regulators operate the same. The best don't try to outpace innovation; instead, they set broad, flexible frameworks and invite builders into the conversation. I've had candid discussions with policymakers in several countries, and the ones making real progress are those who bring founders, engineers, even sceptics into the room and ask the tough questions early. As an example, last year Bitgrit was invited to the DLT foundation roundtable at Abu Dhabi Finance Week, where the agenda was less about defending the status quo and more about finding practical ground.

That's when regulation works: when it's co-created, not imposed. The fastest path forward isn't expecting policymakers to outpace innovation, but to build open channels so industry and regulators can adapt together. That's how rules get written that actually work on both sides of the table.

What has been the biggest regulatory hurdle you've faced as an AI and Web3 founder? How did you overcome it?

In 2021, we launched a token out of Japan after months of legal prep, thinking we were finally ready to go global. That confidence vanished almost overnight. The tax rules were so unclear that, if we were to raise $5 million, our liability could have been calculated on the total market cap, which for us meant a tax bill approaching $500 million, on money we didn't even have. It made no practical sense.

I remember one meeting where I had to use Monopoly money just to explain to a regulator the difference between“circulating supply” and“total supply.” But the guidance didn't change, and we realized we could lose the entire company to a rule that had nothing to do with reality. That's when I knew we had to look elsewhere. The turning point came when we joined Hub71 in Abu Dhabi. Beyond incentives to expand in the middle east, it gave us direct access to ADGM that was much more open to listen to our situation. That partnership ultimately led to Bitgrit becoming the first company in the world to get a license for tokenizing AI assets under a DLT Foundation at ADGM.

We're now collaborating with ADGM and Japan's FSA, on a policy research paper to help others avoid the chaos we faced. My advice: If the rules don't make sense, don't wait around hoping they'll change for you. Cut your losses early, learn fast, and find the place where you can actually build.

For founders just starting out, what are the most common misconceptions about regulation, and what advice do you wish you had received early on?

One big misconception is that regulators are just there to say“no.” In my experience, engaging early, well before launch, can actually speed things up. We started informal conversations with ADGM months before we shipped anything, and that helped us get feedback, solve issues in advance, and build trust. Good regulators aren't roadblocks; they want innovative companies, as long as you play by the rules.

The other trap is underestimating how long compliance really takes. Our legal review for Bitgrit took six months, which was longer than our engineering sprint. Translating AI governance into legal language felt like explaining quantum physics in court, but it paid off. If you're doing something new, plan for it, and don't expect shortcuts.

Most importantly, don't treat compliance as a chore. The requirements to add things like audit trails or stronger privacy features ended up making our platform stronger and more appealing to big clients. And never forget where you're regulated matters as much as what you're building. We moved to Abu Dhabi because the rules were clear and the ecosystem was supportive and that choice changed our trajectory.

Looking ahead, what policy trends or regulatory shifts do you think will most impact the next generation of AI and Web3 founders?

For AI, formal governance is arriving quickly. New laws like the EU's AI Act will require startups to prioritize risk assessments, transparency, and accountability from day one. Standards around data use, explainability, and model audits are about to become the norm.

On the Web3 front, regulations are moving toward clearer definitions for digital assets and more unified rules across regions. Legislation such as Europe's MiCA is shaping global standards, and more countries are experimenting with frameworks for DAOs and tokenized assets. Another important shift is increased international cooperation, with regulators now sharing best practices and sometimes collaborating on cross-border pilot projects.

For founders, this means higher expectations for transparency and ethics, but also more clarity and consistency. The next generation of startups will need to adapt quickly, stay informed, and be proactive in engaging with policymakers. Those who lean into the policy conversation will be best positioned to shape and succeed in the future landscape.

MENAFN03082025000049011007ID1109879105