Canada’s AI Regulatory Landscape After the Withdrawal of the Artificial Intelligence and Data Act
The proposed Artificial Intelligence and Data Act (AIDA) was introduced in November 2022 as part of Canada’s Digital Charter Implementation Act (Bill C-27). However, the bill died on the order paper when Parliament was prorogued in January 2025, leaving Canada without a dedicated AI-specific law. This withdrawal has shifted the regulatory focus toward existing privacy frameworks, voluntary industry codes, and emerging governance structures.
Additionally, the government introduced the Code of Conduct for Generative AI in September 2023, a voluntary framework encouraging ethical AI practices among developers and deployers.
In September 2025, Minister of Artificial Intelligence and Digital Innovation Evan Solomon announced a 26-person task force to update Canada’s AI strategy, emphasizing digital sovereignty as a critical democratic priority. This initiative aligns with broader federal investments, including over C$1 billion allocated in the 2025 budget to strengthen Canada’s AI and quantum computing ecosystem. The creation of the Canadian Artificial Intelligence Safety Institute (CAISI) further signals a shift toward proactive risk management, though its operational scope remains to be defined without AIDA’s legislative backbone.
AI Adoption and Challenges in Canada’s Business Sector
Despite Canada’s historical strengths in AI research—including breakthroughs like AlexNet at the University of Toronto and contributions from figures such as Geoffrey Hinton and Yoshua Bengio—the country has struggled with commercial AI integration. As of June 2024, Canada recorded the lowest AI adoption rate among OECD countries, with only 12% of firms incorporating AI into their products or services. This lag persisted even as global adoption accelerated, though momentum improved by mid-2025, with adoption rising to 12.2%—double the rate observed six months earlier. By September 2025, 14.5% of Canadian businesses reported plans to adopt AI within the next year, primarily for goods production and service delivery.
Barriers to AI adoption in Canada include lack of relevance to business models, insufficient expertise, and privacy concerns. A 2024 report by Public Works Canada (PwC) highlighted that Canada’s AI adoption rate trails the United States by roughly 25%, reflecting structural challenges in scaling research into industry applications. Geoffrey Hinton, in a 2025 statement, warned that slower adoption could erode Canada’s early advantages in AI, particularly as competitors like the U.S. and China accelerate deployment.
Key sectors such as healthcare, oil and gas, and transportation demonstrate AI’s potential impact despite limited nationwide adoption. In healthcare, tools like Chartwatch*—an AI system developed in Canada—have reduced unexpected hospital deaths by 26% by analyzing patient data for early signs of deterioration. The oil and gas industry, meanwhile, uses AI for automating routine tasks, optimizing production, and predictive maintenance, with projections suggesting up to 50% of upstream job competencies could be automated by 2040. These examples illustrate AI’s transformative capabilities, yet their scalability depends on overcoming regulatory and infrastructure hurdles.
Digital Sovereignty and Infrastructure Investments
Canada’s approach to AI governance increasingly centers on digital sovereignty, defined as the control of AI systems and data within Canadian jurisdiction, aligned with democratic values. The federal Canadian Sovereign AI Compute Strategy, announced in Budget 2024 with up to C$2 billion in funding, aims to bolster domestic computing infrastructure while safeguarding data residency. Alberta has taken a leading role with its AI Data Centres Strategy, targeting C$100 billion in data center investments by 2030, including the Wonder Valley AI Data Centre Park near Grande Prairie, which received exemptions from provincial environmental assessments in April 2026.
As of April 2026, Canada hosts 287 data centers, reflecting efforts to decentralize critical AI infrastructure and reduce reliance on foreign cloud providers. The focus on sovereignty extends to Indigenous-led AI initiatives, such as projects to revitalize Inuktitut using AI-powered language tools. While these efforts highlight Canada’s adaptive governance models, they also raise concerns about data ownership, transparency, and Indigenous leadership in AI development. A 2025 CBC article noted that Inuit leaders emphasize the need for accountability frameworks to prevent exploitation of cultural data, underscoring the tension between innovation and equitable governance.
Provincial and federal investments in computing capacity, coupled with voluntary codes like the Generative AI Code of Conduct, create a patchwork of governance mechanisms. The task force led by Minister Solomon may address these gaps, but its success hinges on aligning disparate initiatives under a cohesive strategy—one that balances innovation with the principles of sovereignty and public trust.
Key dates
- 16 Jun 2022Bill C-27 introduced
- 27 Sept 2023Voluntary generative AI code of conduct launched
- 6 Jan 2025Bill dies on prorogation
- 13 May 2025Minister of AI and Digital Innovation appointed