Overview
The Government of Canada has focused significantly on the digital economy, with initiatives such as the 2024-25 Digital Ambition plan, which continues to modernize government services, prioritize cybersecurity, and improve the digital user experience across federal departments. The Canadian Digital Charter guides the sector toward trust, privacy, and data protection while enabling innovation in fintech, AI, clean tech, and digital health.
In June 2024, Canada introduced the Digital Services Tax (DST), a 3% tax on large tech company revenues, with first payments due June 30, 2025. However, on June 29, 2025, the DST was rescinded, following consultations and revisions to align with broader international tax frameworks.
Since 2024, the government has committed over CA$2 billion (US$1.45 billion) toward building sovereign AI compute capacity and cloud infrastructure. Annual funding also supports startups and SME adoption of AI and clean tech. Key innovation centers like Vector Institute (Toronto), Mila (Montreal), Amii (Edmonton), and the Institute for Quantum Computing (Waterloo).
Canada’s digital transformation market is projected to reach US$74 billion by 2025, with a Compound Annual Growth Rate (CAGR) of 25% from 2024, fueled by cloud migration, AI/ML integration, cybersecurity enhancements, and open banking, supporting hybrid and edge computing development.
Statistics Canada’s 2025 reports highlight accelerated AI adoption across industries, including virtual agents and predictive analytics, while also flagging cybersecurity risks in tandem with digital growth. Efforts to extend broadband to rural and Indigenous regions are ongoing, notably through LEO satellite initiatives as part of national commitments to close the digital divide.
Experts project Canada’s digital economy will grow at approximately 9% CAGR through 2025, driven by surging e-commerce, expanded fintech services, digital payments, and robust public investments. Shopify, Lightspeed, Wealthsimple, and Clearco remain ecosystem leaders, augmented by federal programs like the Canadian Digital Adoption Program (CDAP) that help SMEs integrate digital tools at scale.
Market Challenges
Canada applies various regulatory requirements that U.S. businesses should note, as they may necessitate internal compliance obligations alongside market development opportunities. U.S. companies seeking to enter or expand in the Canadian market must stay informed about these regulatory changes and ensure that their operations align with Canada’s evolving focus on privacy, cybersecurity, and digital trade fairness.
Regulatory Environment
Data Privacy
Canada enforces two federal privacy laws overseen by the Office of the Privacy Commissioner of Canada. The Privacy Act, which governs how federal government institutions manage personal information. The Personal Information Protection and Electronic Documents Act (PIPEDA), which regulates how private-sector organizations collect, use, and disclose personal data in commercial activities.
In 2024, Canada introduced the Digital Charter Implementation Act (Bill C-27), which was expected to come into effect in 2025. However, Bill C-27 died following the prorogation of Parliament in January 2025. It is expected to be reintroduced in Parliament, but it is unclear what the new bill will include.
Proposed AI Legislation
The Artificial Intelligence and Data Act (AIDA) was introduced in the Canadian Parliament in June 2022 as part of Bill C-27, the Digital Charter Implementation Act. The goal of AIDA was to protect individuals and communications from the adverse impacts associated with high-impact AI systems and to support the responsible development and adoption of AI across the Canadian economy. The Act aimed to establish guidelines for AI transparency, accountability, and risk mitigation for organizations developing or deploying AI technologies.
While Bill C-27 progressed through committee stages in 2023 and 2024, it did not pass before Parliament was prorogued in early 2025. As a result, AIDA and the other provisions of Bill C-27 died on the order paper and will need to be reintroduced in a future parliamentary session to become law.
Data Localization
The Province of Quebec adopted Law 25 (formerly Bill 64) in September 2021 to modernize its data protection regime. Under this law, transfers of personal data outside Quebec are restricted to jurisdictions with data protection regimes deemed “adequate” by the Quebec government. Organizations are required to conduct privacy impact assessments for such transfers, ensuring that personal data is transferred lawfully and securely.
The law introduced new provisions in stages, with core rules on protecting personal information coming into effect in September 2022. By September 2024, the remaining provisions, including those governing cross-border data transfers, were fully implemented.
As of 2025, organizations operating in Quebec must comply with these comprehensive requirements to ensure the lawful handling and transfer of personal data, including adherence to the newly established data transfer rules.
Cybersecurity
The Canadian Centre for Cyber Security, a federal government office within Communications Security Establishment Canada, reports that Canada continues to face a surge in cyber threats into 2025. Government agencies, businesses, and municipalities have experienced disruptions, with no sector untouched as cyber-attacks evolve rapidly, often outpacing institutional defenses.
On June 18, 2025, the Government of Canada introduced Bill C-8, which proposes the Critical Cyber Systems Protection Act (CCSPA). The CCSPA has two purposes. First the bill would amend the Telecommunications Act to empower the government to stop telecommunications service providers from using or providing products and services posing security risks. Second, the will would impose minimal cyber security obligations on organizations in certain critical infrastructure sectors under federal jurisdiction, including transport, energy and banking through the CCSPA.
Public Sector Procurement
The Government of Canada remains the largest single purchaser of IT goods and services in the country. The public procurement cycle typically spans 12-24 months and requires companies to register with the Government’s supplier database to gain access to procurement vehicles. While in-country representation is not mandatory, it offers U.S. companies an advantage, particularly in after-sales service and face-to-face networking opportunities.
U.S. companies should be aware of trade issues between Canada and the U.S. that could impact procurement opportunities, including the U.S.-Canada-Mexico Agreement (USMCA) and other cross-border regulatory concerns. On July 14, 2025, a new federal government procurement policy came into effect, and will restrict suppliers from countries that limit Canadian access to their own government contracts from accessing Canadian federal contracts. U.S. companies should monitor evolving trade restrictions and tariffs, which may affect the cost and competitiveness of their offerings in Canadian public sector tenders.
Digital Trade Barriers
Online Streaming
The Canadian Government passed the Online Streaming Act (formerly Bill C-11) on April 27, 2023, and instructed the Canadian Radio-Television and Telecommunications Commission (CRTC) to develop a new methodology for financial contributions and obligations on streaming platforms to support and promote Canadian programming. The CRTC is also tasked with reviewing how it defines Canadian programming. Final implementation of the law is scheduled for 2026, with the CRTC having the discretion to increase the contribution percentage in the future. The Act continues to be listed in the 2025 National Trade Estimate under “Service Barriers.”
On June 4, 2024, the CRTC announced an “initial base contribution” requiring streaming services, if they meet specific revenue thresholds and are not affiliated with a Canadian broadcaster, to allocate 5% of their Canadian revenue to Canadian production funds during the 2024-2025 broadcasting year, which began on September 1, 2024. In response, major U.S. companies including Netflix, Disney, Amazon, Spotify, and Apple filed legal challenges, arguing that the new rules unfairly target large foreign platforms—specifically those earning over C$25 million in Canada and not affiliated with a Canadian broadcaster—while exempting smaller services and Canadian-affiliated firms. These companies have also indicated their intention to monitor and participate in the CRTC’s ongoing consultations to update the outdated rules used to determine what qualifies as Canadian content.
The U.S. government continues to closely observe developments relating to the Online Streaming Act, expressing concerns over the CRTC’s implementation approach. The initial base contribution decision has reinforced the U.S. government’s view that Bill C-11 disproportionately targets U.S. companies and provides a financial advantage to Canadian firms.
Audiovisual Services
For cable television and direct-to-home broadcast services, more than 50% of the channels received by subscribers must be Canadian channels. Non-Canadian channels must be preapproved (“listed”) by the Canadian Radio-television and Telecommunications Commission (CRTC). Alternatively, non-Canadian channels can become Canadian by ceding majority equity control to a Canadian partner, as some U.S. channels have done. Foreign channels are prohibited from owning video distribution infrastructure in Canada.
Under the USMCA’s Cross-Border Trade in Services Chapter, Canada committed to allowing U.S. home shopping channels, including modified versions, to be distributed in Canada. In response to U.S. engagement on this issue, Canada introduced new rules in August 2023 to support this commitment. U.S. continues to monitor implementation to ensure full compliance.
Canada permits Canadian cable and satellite suppliers to pick up the signals of U.S. stations near the border and redistribute them throughout Canada without the broadcaster’s consent. Content owners can apply for compensation for the use of such content in Canada from a statutorily mandated fund into which Canadian cable and satellite suppliers contribute. U.S. broadcasters continue to consider this compensation insufficient and have sought the right to negotiate the carriage of their signals on commercially set rates and terms, as can be done in the U.S.
In 2025, through Consultation 20252, the CRTC launched public consultations to modernize its definition of Canadian content and assess broader market dynamics among cable distributors, broadcasters, and streaming platforms. The review also focused on fairness in content distribution, discoverability of Canadian and Indigenous programming, and the effectiveness of tools like the Wholesale Code and dispute resolution. These developments may influence future policy decisions but have not yet resulted in regulatory changes.
Digital Trade Opportunities
Advanced Manufacturing
Canada continues to build on its strong manufacturing base, positioning itself as a global leader in advanced manufacturing. Supported by targeted government initiatives and a skilled workforce, the country is expanding its capabilities in systems integration, artificial intelligence (AI), machine learning, sensors, vision, and automation. These technologies are transforming industries across Canada, particularly in automotive, aerospace, agricultural machinery, equipment, and chemical production.
The integration of AI and robotics is driving efficiency, improving product quality, and creating new growth opportunities. Canada’s focus on clean technology and sustainability further enhances its global competitiveness, aligning with international standards for green manufacturing. This shift opens the door for U.S. companies to collaborate in areas such as automated systems and AI-driven industrial solutions.
In 2024–2025, Canada launched several major initiatives to accelerate this transformation, including a $2 billion AI Compute Strategy with funding for supercomputing and green AI data centers, a 30% Clean Technology Manufacturing Investment Tax Credit, and a $49 million EV battery R&D center in Oakville in partnership with Siemens. These investments directly support smart automation, industrial AI, and clean-tech innovation—creating tangible market opportunities for U.S. firms across Canada’s evolving manufacturing ecosystem.
Artificial Intelligence
Canada maintains its global leadership in artificial intelligence, backed by deep research infrastructure, strong government support, and a vibrant startup ecosystem. As of 2025, there are over 670 AI startups—including more than 30 generative AI firms—and the national AI market is projected to exceed US $5 billion. Foundations like Mila, Amii, and the Vector Institute remain central pillars of the PanCanadian AI Strategy (launched in 2017, renewed in 2022), which continues to fund AI research institutes, commercialization, talent development, and national standards.
In December 2024, the government launched a C$2 billion Sovereign AI Compute Strategy to secure domestic control over high performance computing. The strategy allocates C$1 billion to public supercomputing systems, CAD$700 million toward Canadian-led, renewable-powered AI data centers, and CAD$300 million through an AI Compute Access Fund aimed at helping SMEs access advanced compute.
These efforts are bolstered by additional 2021–2026 investments—such as CAD$60 million for AI institutes, CAD$125 million for innovation clusters, CAD$208 million for CIFAR, CAD$40 million for compute capacity, and CAD$8.6 million for standards development—all part of the second phase of the PanCanadian AI Strategy.
These initiatives ensure Canada remains a powerhouse of AI innovation, research, and talent.
With AI solutions taking root across healthcare, finance, logistics, energy, and even advanced manufacturing, U.S. businesses have significant opportunities to partner on research, commercialization, and deployment within Canada’s world-leading AI ecosystem.
Quantum Technologies
Canada has remained committed to quantum technology research and development for several decades. Between 2012 and 2022, the Canadian government invested over CAD$1 billion (US $740 million) in quantum science, with private investors contributing an additional CAD $1 billion (US $740 million) since 2002. Canadian researchers continue to lead in the development of control software and applications for quantum computing. Notably, the world’s first quantum computing company, D-Wave, was launched in 2011 in Canada and is headquartered in Vancouver. Xanadu, based in Toronto, focuses on quantum software and developed PennyLane, a software library for programming quantum computers.
The National Research Council of Canada (NRC) projects that the quantum sector will become a CAD $139 billion (US $103 billion) industry by 2045, creating over 200,000 jobs and contributing an estimated 3% to Canada’s GDP. In 2023, the Canadian government launched the National Quantum Strategy (NQS), a CAD $360 million (US $266 million), seven-year initiative aimed at strengthening research, talent development, and the commercialization of quantum technologies.
In its 2024 defense policy update, titled “Our North, Strong and Free”, Canada emphasized the growing need for investments in quantum technologies to address security threats such as increasing Arctic accessibility and the rising threat of cyber-attacks. Canada has pledged to continue its collaboration with its Five Eyes partners (Australia, New Zealand, United Kingdom, and U.S.) to increase investments in quantum and related technologies.
The Quantum Science & Technology Strategy Implementation Plan (Quantum 2030), published by Canada’s Department of Defence and Canadian Armed Forces (DND/CAF) in 2023, outlines a roadmap to ensure DND/CAF is prepared for the disruptive potential of quantum technologies. Quantum 2030 focuses on identifying key users of quantum technologies, training personnel in quantum literacy, harmonizing quantum investments across DND/CAF, and engaging with industry and academia to stay at the forefront of innovation.
Canada’s Cyber Centre partners with the U.S. National Institute for Standards and Technology (NIST) on the Cryptographic Module Validation Program (CMVP) and celebrated NIST’s August 2024 release of the first three finalized post-quantum encryption standards. The Cyber Centre also collaborates with NIST to update the Cryptographic Algorithm Validation Program (CAVP) and the CMVP to test implementations of these new post-quantum cryptography (PQC) algorithms, ensuring a smooth transition to PQC technologies within the Government of Canada.
Cybersecurity
Canada’s cybersecurity market continues to expand rapidly, driven by growing digital infrastructure, rising volumes of sensitive data, and increasingly sophisticated cyber threats. In 2024, the market reached US$12.96 billion, with strong momentum projected into 2025. Threats are becoming more complex and widespread due to greater interconnectivity, AI-enabled attacks, and increasingly organized cybercriminal networks. U.S. exporters of cybersecurity technologies and services are well-positioned to help meet Canada’s escalating demand for advanced solutions.
Cybersecurity is a top priority for the Canadian federal government. Canada’s cyber intelligence agency, the Communications Security Establishment (CSE), responded to over 2,000 cyber incidents targeting federal systems and critical infrastructure in 2022—a number expected to grow given recent geopolitical tensions and digital vulnerabilities. In response, the Canadian government continues to implement its National Cyber Security Strategy, which is undergoing a 2025 update to reflect emerging threats, particularly in AI, space, and quantum-enabled environments.
In the private sector, cybersecurity demand is growing across high-risk industries such as financial services, energy, healthcare, telecommunications, transportation, and manufacturing. On average, a cyber breach in Canada costs companies approximately US$5.08 million, significantly higher than the global average of US$4.45 million. Financial institutions face breach costs of up to US$8.79 million, while energy sector breaches average US$6.86 million, underscoring the need for sector-specific protection.
Opportunities abound for U.S. companies offering advanced threat detection, real-time monitoring, incident response, cloud security, identity access management, and post-quantum encryption. In addition, sectors such as automotive development, aerospace, smart construction, and digital aviation increasingly seek tailored cybersecurity solutions to protect complex, interconnected systems. As Canada modernizes its digital infrastructure, U.S. firms have significant openings to establish themselves as trusted partners in strengthening cyber resilience.
Financial Technologies
The financial technologies (fintech) sector in Canada is dynamic and evolving, offering significant opportunities for innovation and growth. The collaboration between fintech startups and traditional financial institutions is expected to shape the future of the industry, enhancing the accessibility and efficiency of financial services for Canadians. The Canadian financial-services industry is highly concentrated, with the top five banks generating more than three-quarters of banking revenue, while the top six insurance firms generate nearly 50% of revenues in the sector.
Canada ranks among the world’s top five countries for smartphone penetration, internet usage, and higher education levels, all of which suggest the country’s readiness to embrace new technology. However, Canada’s fintech growth has not reached the same level as in other developed countries. Canada remains among the bottom five developed countries for the adoption of digital banking, digital business-to-business (B2B) services, and fintech solutions. Only 13 % of Canadian banking consumers use fintech’s, for instance, compared with 32% in the United Kingdom and 42% in the U.S. This gap represents significant untapped potential.
Canadian banking revenues from retail and SMEs reached US$135 billion in 2022, with just 3% allocated to fintech. This is approximately US$5 billion short of what could be achieved if fintech penetration matched that of the U.S., where fintech penetration is 8%.
For long-term industry growth, Canada’s fintech sector needs critical developments in areas like consumer behavior, partnerships, funding, the regulatory environment, and talent acquisition. One potential niche segment for fintech services is people who have recently settled in the country. Canada has one of the highest immigration rates globally, welcoming about 500,000 people in 2022. Of these, 60% of all immigrants were between 20 and 39 years old, the age group most likely to use fintech products.
However, partnerships remain scarce, as fintech leaders, investors, and academics have identified several challenges, such as long sales cycles (up to 24 months), costly risk management and compliance requirements, and stringent exclusivity clauses. Regulatory compliance requirements also hinder partnership formation.
Canada’s fintech ecosystem saw record investment in 2024, with US$7.8 billion in funding during the first half of the year—more than seven times the full-year total of US$1.1 billion in 2023. The two largest investments in Canadian fintech—Montreal-based Nuvei Corp. and Plusgrade Inc.—accounted for 94% of the total value invested in Canada and were among the top five deals globally. These two deals reflect the growing fintech scene in Montreal and Quebec, where the startup environment thrives thanks to strong support from institutional investors and a steady influx of talent from world-class universities.
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Commercial Service Contacts
For additional information on this sector, please contact Commercial Specialist Tracey Ford at Tracey.Ford@trade.gov or by phone at (613) 688-5406.
Helpful Resources
- I&A’s Office of Digital Services Industries (ODSI)
- National Trade Estimates Report – Digital Trade Barriers
- White House CET List, e.g., Artificial Intelligence -> Machine Learning
- U.S. Department of Commerce, International Trade Administration, Industry & Analysis Office of Digital and Emerging Technology Service (DETS)
- United States International Cyberspace & Digital Policy Strategy - United States Department of State
- United States Requests USMCA Dispute Settlement Consultations on Canada’s Digital Services Tax | United States Trade Representative (ustr.gov)