Finding the Balance: How Canada Should Approach AI Regulation
Key Takeaways
Artificial Intelligence (AI) is the fastest-adopted technology in human history, and Canada is currently at a critical juncture regarding its regulation.
At present, Canada lacks a comprehensive AI regulatory framework, relying instead on a patchwork of sector-specific laws and general regulations.
The upcoming national AI strategy presents a vital opportunity for Canada to establish a measured, harm-based regulatory framework that addresses emerging risks without deterring AI investment and innovation.
The Current State of AI Regulation in Canada
Currently, Canada does not have a comprehensive AI law. The Artificial Intelligence and Data Act was introduced as part of Bill C-27 in 2022 but was ultimately abandoned when Parliament dissolved in 2025. Consequently, Canada lacks the kind of comprehensive, economy-wide AI regulatory framework that other jurisdictions have implemented.
In practice, however, AI technologies are regulated through a combination of sector-specific legislation and laws of general application. For example, Quebec’s Law 25 imposes requirements on organizations that make decisions exclusively through automated processing of personal information, mandating transparency and the right to human review.
Other sector-specific frameworks govern particular AI-enabled technologies. The federal Motor Vehicle Safety Act and provincial highway traffic acts outline regulations for autonomous vehicles, while Ontario’s Working for Workers Act, 2023 mandates transparency when AI is used in hiring processes.
Beyond these targeted measures, Canada has a body of general laws that address many potential AI-related harms. The Personal Information Protection and Electronic Documents Act governs the collection, use, and disclosure of personal information in commercial activities, applicable regardless of whether data processing is performed by humans or AI systems.
International Approaches to AI Regulation
Regulating AI is exceptionally complex, requiring policymakers to balance competing considerations, including harm prevention, broader social impacts, economic growth, and geopolitical positioning.
AI is a general-purpose technology, similar to electricity and the Internet, yet societies have never attempted to regulate such technologies at a macro level as is being considered for AI. Furthermore, generative AI has achieved mainstream adoption at an unprecedented pace, which poses challenges for regulatory frameworks that typically evolve over much longer timelines.
Countries worldwide are experimenting with various approaches to AI regulation. The European Union’s Artificial Intelligence Act represents one of the most comprehensive regulatory frameworks, introducing a risk-based system that tailors regulatory requirements based on potential harm. However, its prescriptive nature often leads to significant compliance costs and severe penalties for non-compliance.
In contrast, the United States has adopted a decentralized, agency-driven approach to AI governance, emphasizing leadership and innovation. Rather than introducing a federal AI framework, U.S. policy relies on existing laws and sector-specific oversight, while individual states are beginning to introduce targeted legislation addressing specific AI risks.
A Framework for Balanced, Harm-Based Regulation
As Canada develops its approach to AI governance, policymakers must strike a balance between addressing emerging risks and ensuring the country remains an attractive environment for AI research and investment. Feedback from federal AI consultations underscores the importance of transparent, risk-based regulatory frameworks that promote public trust in AI systems.
Overly burdensome regulations could deter investment and innovation, especially given the more lenient regulatory landscape in the United States. Therefore, Canada should adopt a measured, harm-based regulatory approach centered around four core principles:
- Enforcement of Existing Laws: Canada already possesses a substantial body of legislation covering consumer protection, privacy, and human rights. Policymakers must ensure that existing laws are effectively applied and enforced in the context of AI.
- Targeted Measures: Where genuine gaps exist, targeted legislation may be appropriate, but policymakers should avoid conflating distinct issues or creating overly broad responses.
- Leverage Existing Sectoral Regulators: Agencies like Health Canada and the Office of the Superintendent of Financial Institutions should apply existing rules to AI applications within their sectors, allowing regulation to reflect the unique risk profiles of different industries.
- Harm-Based Backstop Law: Canada should consider enacting flexible legislation that allows for rapid regulatory response to unforeseen harms or new risks, while maintaining a lighter regulatory touch during stable periods.
A Look Ahead
With the anticipated release of Canada’s renewed national AI strategy, policymakers have an opportunity to clarify the country’s approach to AI governance. A balanced regulatory framework that prioritizes existing laws, targeted interventions, and sector-specific oversight can help Canada address emerging risks while fostering innovation and investment in AI.
Striking this balance will be essential for Canada to maintain its reputation as a global leader in artificial intelligence while ensuring that the deployment of these technologies aligns with public expectations around safety, fairness, and accountability.
