A Blueprint for Canada’s Digital Sovereignty

Summary

Countries that don't control their digital infrastructure don't control their future. Digital sovereignty means control over compute, connectivity, and capital – the backbone of modern economies. Canada’s data lives on foreign servers, our satellites are foreign-owned and our digital currency framework doesn't exist.

Sixty percent of Canada's cloud market runs on US hyperscalers subject to US law under the CLOUD Act¹. Over 500,000 Canadians depend on Starlink for internet², and while it does provide internet for those who otherwise would not have access, a single foreign provider does not provide security and exposes Canada to digital dependency. 

Canada needs to build control through three actions: sovereign connectivity by fast-tracking Canadian headquartered companies procurement while backing Indigenous-owned networks; sovereign compute by implementing the $2B AI Compute Strategy, scaling the Protected B cloud, and doubling investment in the Canadian Photonics Fabrication Centre; and sovereign capital by passing the Stablecoin Act, Bill C-26, and strengthened Investment Canada Act enforcement.

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Narrative

Canada needs to cease treating "digital sovereignty" as an abstract academic concept. Digital sovereignty is control – control over data, communications, AI, money, and defense. At its core, it means Canadian data, communications, and infrastructure are stored, governed, and secured under Canadian law, not someone else's. This requires three things: physical infrastructure (servers, satellites, networks) located in Canada and controlled by Canadian companies; legal infrastructure through Canadian regulation and jurisdiction; and economic control through the ability to tax, procure, and invest strategically. Without those three layers, we don't have sovereignty – we have dependency.

Sixty percent of Canada's cloud market is controlled by US hyperscalers⁴. Under the US CLOUD Act of 2018, American authorities can compel these companies to hand over data regardless of where it's stored, creating direct legal exposure for Canadian organizations. The Government of Canada's own Digital Sovereignty White Paper acknowledges: "As long as a CSP that operates in Canada is subject to the laws of a foreign country, Canada will not have full sovereignty over its data.⁶" The satellite situation is equally concerning. Over 500,000 Canadians now depend on Starlink for internet connectivity, generating an estimated $420 million in 2024 revenue ⁷. 

Other nations take the development of these capabilities and securing sovereignty seriously. The United States committed $8 billion through the CHIPS Act, not including additional low interest debt, and tax credits⁸. The European Union mobilized €43 billion through the EU Chips Act, targeting 20% of global semiconductor production by 2030⁹. China invests almost $100 billion annually in AI alone, with $56 billion (57%) coming directly from the government¹⁰. Their "Big Fund" has deployed over $100 billion across three phases for semiconductor independence, with Phase III totaling $47.5 billion¹¹. Against this backdrop, Canada's $2 billion AI Compute Strategy¹² represents roughly 4% of US CHIPS Act funding and 5% of EU Chips Act mobilization. We are not keeping pace with allies, let alone competitors.

Canada has genuine strengths. Cohere, the Toronto-founded AI company, is valued at $7 billion after raising $1.6 billion in funding, and has explicitly rejected acquisition offers that would move it abroad¹³. Telesat's Lightspeed constellation – backed by $2.54 billion in government funding including $2.14 billion federal – will deliver sovereign satellite communications by 2027¹⁴. The Canadian Photonics Fabrication Centre in Ottawa is the only indium phosphide foundry in North America, manufacturing components essential for AI infrastructure¹⁵. D-Wave achieved quantum supremacy in March 2025, solving problems in minutes that would take classical supercomputers nearly one million years. We have world-class capabilities in satellites, AI, photonics, and quantum computing.

The question isn't whether Canada has the capability. It's whether we'll build the infrastructure to keep these companies Canadian and protect our digital future from foreign control. Every procurement contract, every infrastructure grant, every tax credit should be judged by one question: Does this strengthen or weaken Canada's digital sovereignty? As Kepler Communications CEO Mina Mitry told the Globe and Mail¹⁶: "If all of our communications are eventually going to be in space, we had better play a role in that. Otherwise, we're going to become a branch plant." Digital sovereignty isn't a slogan, it's an industrial strategy for the 21st century. It's how Canada ensures that when the world fragments along technological lines, we're not just consumers on someone else's platform.

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The Defence and National Security Imperative

Digital sovereignty is not merely an economic or industrial policy question, it is a national security imperative. Canada's current digital dependencies create vulnerabilities that adversaries could exploit and that even allied policy shifts could expose.

Satellite Communications Vulnerability

Over 500,000 Canadians including remote communities, emergency responders, and critical infrastructure operators depend on Starlink, a foreign-controlled satellite constellation. This creates three distinct risks:

1. Service continuity: A foreign provider could modify, degrade, or terminate service based on commercial decisions, home-government pressure, or geopolitical developments outside Canadian control.
2. Operational security: Canadian government and military communications routed through foreign-controlled infrastructure are subject to foreign intercept capabilities and legal jurisdictions.
3. Arctic sovereignty: Canada's ability to monitor, communicate, and operate in the Arctic, a region of increasing strategic competition, depends on satellite coverage we do not control.

The Enhanced Satellite Communications Project – Polar (ESCP-Polar) exists precisely to address this gap, providing sovereign military satellite coverage in the Arctic. Delays in this project directly compromise Canada's defence posture in the region. Canada should treat digital infrastructure as critical defence infrastructure. We should prioritize ESCP-Polar completion, mandate Canadian-controlled alternatives for defence and critical infrastructure communications, and pass Bill C-26 as a national security priority.

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Existing Solutions

China's National AI Strategy (2017): The State Council's New Generation AI Development Plan coordinates $56B annual government investment across designated "National AI Champions" for specific domains¹⁷. The Big Fund deployed $100B+ for semiconductor independence.¹⁸ Result: China now files 49.1% of global AI patents¹⁹, 1.8 million in 2024 versus 501,831 for the US.

EU Digital Sovereignty Framework: GDPR has levied €5.9-6.7 billion in fines²⁰ since 2018, including €1.2B against Meta. The Digital Markets Act designates 7 "gatekeepers" with fines up to 20% of global turnover²¹. MiCA provides comprehensive crypto regulation requiring 30-60% of stablecoin reserves in bank deposits²². The EU Chips Act mobilizes €43 billion targeting 20% of global semiconductor production by 2030²³.

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What Must Be Done

Canada should treat digital infrastructure as critical national infrastructure equivalent to roads, bridges, and energy systems. This requires coordinated action across procurement, regulation, and strategic investment to reduce foreign dependency while building domestic capability. Procurement is the most powerful lever available – every dollar spent is either building Canadian capability or subsidizing foreign dependency. Here are three solutions to bring Canada's digital sovereignty home.

Build Sovereign Connectivity Infrastructure from Space to Community

Canada needs a layered connectivity strategy pairing national satellite systems with community-owned networks. At the national level, this means fast-tracking procurement contracts, and completing the $5B Enhanced Satellite Communications Project – Polar for Arctic military coverage²⁷. Federal departments should justify any satellite capacity purchase from foreign providers when Canadian alternatives exist – treating procurement as industrial policy, not cost optimization. At the community level, Indigenous-owned networks have built resilient solutions that align with Indigenous data sovereignty and economic development²⁸; these should be treated as sovereign infrastructure partners. Canada should require federal departments to source 50% of satellite and cloud capacity from Canadian-controlled providers by 2028, with "comply or explain" justification for exceptions.

Scale a Sovereign Compute and Data Stack

Canada should gain control of our technology stack, from data centres to chips. Implement the $2B Canadian Sovereign AI Compute Strategy with urgency³⁰ – $700M for commercial AI data centre capacity, $705M for public supercomputing, $300M for SME compute access – while expanding Protected B cloud capacity and doubling investment in the Canadian Photonics Fabrication Centre to $250M³¹. Specified categories of data – federal government data, health records, critical infrastructure control systems, defence-related information – should be stored on Canadian-controlled infrastructure under Canadian legal jurisdiction. Phase in over 3 years with clear compliance timelines.

Complete the Digital Sovereignty Legal Framework

Three pieces of legislation are needed to create a regulatory backbone for digital sovereignty: the Stablecoin Act (Bill C-15) establishing Bank of Canada registration and 1:1 Canadian-asset reserve backing; Bill C-26 ³³ (Critical Cyber Systems Protection Act) creating mandatory security standards for critical infrastructure; and strengthened Investment Canada Act enforcement applying heightened scrutiny to AI, quantum, and semiconductor acquisitions under Bill C-34 amendments and the March 2025 Sensitive Technology List. As Indigenous advocates have demonstrated, sovereignty requires ownership and control, not just access. These bills exist; passing them requires political will, not new policy development³⁴. For foreign digital service providers operating in Canada, we should require reciprocal market access, data localization commitments, or Canadian infrastructure investment as a condition of continued operation at scale.

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Common Questions

Won't this cost too much and duplicate existing infrastructure? 

Canada's $2B Sovereign AI Compute Strategy is a fraction of what competitors invest, China spends almost $100 billion annually on AI alone. The cost of dependency is higher: foreign control over critical systems, data accessible to foreign governments under the CLOUD Act, and losing our best companies to acquisition. These investments will result in more companies staying and coming to Canada, if we don’t make them Canada will lose jobs and money in tax revenues.

Will this harm our relationship with the United States and trade partners? 

Digital sovereignty isn't anti-American, it's pro-Canadian. The US itself is reshoring semiconductor manufacturing with $52.7B through the CHIPS Act, including $39B in manufacturing incentives. Every major democracy is building sovereign digital capability. We're not proposing to ban foreign services, but to ensure Canadian alternatives exist for critical functions, which is exactly what the US is doing domestically. 

Do Canadian companies have the capability to compete with global tech giants? 

Cohere is valued at $7 billion with $1.6B raised and revenue crossing USD$240M annualized³⁵. D-Wave achieved quantum supremacy with a ~$10B market cap after a 256% stock gain in 2025. The CPFC is the only indium phosphide foundry in North America. Telesat is deploying a 198-satellite constellation. Canada has the companies, we just need the infrastructure and policy framework to keep them here.

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Conclusion

Digital sovereignty isn't a slogan – it's an industrial strategy for the 21st century. Canada currently rents its digital infrastructure from foreign powers, exposing our data, communications, and AI to foreign law and foreign control. We have the companies and the talent to build sovereign capability across satellites, AI compute, and digital finance. What we need is the political will to invest at scale, reform regulations, and prioritize Canadian-controlled infrastructure. The alternative is becoming a branch plant economy in the digital age and exporting our ideas, our data, and our dreams, then buying them back at a markup.

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