When Policy Closes Doors: Canada’s AI at Risk October 27, 2025

British Columbia's latest energy legislation — limiting electricity for artificial-intelligence data centres and permanently banning new crypto-mining grid connections - has ignited a wave of quiet concern among investors, infrastructure developers, and policy observers. The province says the goal is to "protect grid stability" and "prioritize jobs for British Columbians". Yet the signal it sends to global markets is clear: uncertainty.

For an economy trying to establish technological sovereignty, that uncertainty is expensive. It discourages the very kind of long-term, high-infrastructure commitments that sovereign AI demands.

The federal optics problem

At the national level, Ottawa has been eager to appear proactive. This August, the federal government announced a memorandum of understanding with Cohere - a Toronto-based AI firm - to explore "world-leading artificial intelligence" for the public sector. The headlines were celebratory; the commitments were not.

An MOU, by definition, creates no binding obligations. It's a handshake, not a contract. There was no hardware commitment, no defined compute allocation, and no clarity about where or how the federal government would deploy AI workloads. In effect, Ottawa produced optics without infrastructure.

The distinction matters. Nations that treat AI as a strategic capability: France, Japan, the UAE are already allocating compute, building sovereign clusters, and specifying domestic hosting zones. Canada is still debating frameworks while applauding intentions.

For private industry, that difference is material. AI firms and their investors don't build five-year plans around non-binding gestures. They build around predictable infrastructure, affordable energy, and coherent policy. Canada currently offers none of those at scale.

The BC decision: rational intent, damaging signal

British Columbia's policy context is understandable: the province relies heavily on hydroelectric power, which is finite and politically sensitive. After an influx of high-demand proposals: from crypto miners to potential AI clusters, the government opted to cap allocations: roughly 300 megawatts for AI workloads and 100 megawatts for other data centres, issued through a competitive bidding process every two years.

On paper, this ensures the grid serves industries that "create jobs and economic value". In practice, it transforms B.C. Hydro from an energy utility into a gatekeeper of innovation. Developers can no longer assume a clear path to power. Every project becomes a political calculation.

Investors notice. Data-centre builders require long-term visibility before they commit to land, cooling infrastructure, and supply-chain contracts. When access to electricity becomes conditional or delayed by bureaucratic selection cycles, the capital simply moves elsewhere, often south of the border, where states compete to incentivize compute infrastructure rather than ration it.

The result: a province uniquely positioned to host clean, renewable AI compute may end up exporting its opportunity instead.

The foreign influx and the "sovereignty" paradox

Ironically, while domestic infrastructure hesitates, foreign operators are moving in. Telecommunications giants and international technology partners are filling the gap with initiatives branded as "Canadian sovereign AI".

TELUS, for example, has announced plans for sovereign AI factories in Kamloops and Rimouski, powered by NVIDIA hardware. Cohere has entered a strategic partnership with Bell Canada to deliver sovereign AI services hosted within Bell’s upcoming data-centre network. Fujitsu, a Japanese conglomerate, has also signalled support for Cohere's enterprise compute initiatives.

Each of these partnerships adds capacity, but also complexity. When the underlying compute hardware, financing, or operational control flows through non-Canadian multinationals, the term sovereign becomes semantic. Data may sit within Canadian borders, but the capital stack and intellectual property often do not.

This is the new paradox: Canada's sovereignty narrative is being advanced through foreign scale. The country’s data protection frameworks remain strong, yet the infrastructure enabling them is increasingly imported. It's a form of jurisdictional hosting without jurisdictional autonomy.

Quebec, Europe, and the linguistic corridor

Meanwhile, global firms are discovering their own paths into Canada. French startup Mistral AI, a rising European rival to OpenAI and Anthropic, is expanding its footprint in Montreal, targeting clients in Quebec’s francophone market. According to The Logic, Mistral sees Quebec as a bridge between Europe's data-protection ecosystem and Canada’s adequacy status under EU law.

It's a clever strategy: deploy European-trained models that comply with EU privacy and sovereignty rules, deliver them from a Canadian jurisdiction considered "adequate" under the GDPR, and market the result as a local solution. The effect is to make Canada an operational proxy for European AI exports - a staging ground for compliant deployment rather than a base of indigenous capability.

While Canada debates its own definition of sovereignty, others are already using that definition as a market opportunity.

The pattern of delay

This pattern is familiar. Canada was early to academic excellence in AI (think CIFAR, Vector Institute, and Mila) but late to commercialization. It was early to environmental leadership in clean power, yet slow to translate it into competitive compute. It's early to recognize the privacy value of sovereignty, but late to align policy with infrastructure reality.

Each delay compounds. Talent migrates toward the ecosystems that can promise deployment, not just research. Startups relocate to where power and compute are guaranteed. Global operators absorb the resulting vacuum and rebrand their presence as "Canadian capacity."

This isn't a failure of intelligence or innovation; it's a failure of execution.

Engineering sovereignty from fundamentals

Real sovereignty isn't legislated - it's engineered. It comes from systems built to operate within clear jurisdictional boundaries, without dependence on external compute or proprietary foreign APIs. It depends on fundamentals: owning your supply chain, designing your software to be self-sufficient, and optimizing infrastructure for locality rather than scale mimicry.

While national and provincial governments deliberate, some independent firms have already adopted this mindset. They're building software architectures that can deploy AI capabilities entirely within Canadian borders, without relying on hyperscaler clouds or waiting for megawatt-class allocations. These systems scale horizontally, orchestrating smaller compute nodes that aggregate power intelligently instead of consuming it indiscriminately.

That design philosophy treats sovereignty not as a compliance checkbox but as a property of engineering discipline. It replaces abstraction churn with mastery of fundamentals. By controlling the full technology stack, from data routing to deployment licensing, it eliminates exposure to external jurisdictional claims.

This approach doesn't need to wait for BC's next power auction or Ottawa's next press release. It's already operating.

A moment for alignment

The BC policy is more than a provincial regulation; it's a signal to investors that Canada has not yet decided what kind of digital economy it wants. A country cannot pursue both grid austerity and technological sovereignty at the same time. Power is the substrate of computation; without predictable access to it, AI policy remains rhetorical.

Canada's federal and provincial governments still have time to align, to create an energy-allocation framework that rewards efficiency and sovereignty, not just scale. The opportunity is immense: abundant renewables, stable governance, and a trusted privacy regime that many nations envy. But without decisive coordination, these advantages will remain academic.

Sovereignty as practice, not posture

The global AI race isn't about who publishes the most ethical guidelines or who signs the most MOUs. It's about who can build - sustainably, securely, and within their own borders - the systems that will define the next decade of digital infrastructure.

True sovereignty will belong to those who can produce and deploy intelligence without borrowing anyone else's jurisdiction. It’s achieved through ownership of fundamentals, not dependence on frameworks.

As British Columbia limits power and Ottawa applauds intentions, one question remains for Canada's builders: will sovereignty be something we legislate, or something we engineer?