Digital sovereignty: regulating the AI wild west in 2026
Alaa Owaineh
How can a government support digital excellence, when it has limited and contested control in the digital realm and when its ability to regulate digital actors is constrained and contested?
This has become a key question that any “smart” state worth its salt needs to urgently address. In the UK, achieving digital excellence has become a high-stakes negotiation between the state, industry, and civil society, as the national government tries to both work with, and regulate, powerful cross-border actors, which are often backed by state power from other regimes. Last week’s threats from the US administration to impose new tariffs on the UK as retaliation for the Digital Services Tax imposed on online platforms is a stark and recent reminder of this challenge.
The AI power multiplier and the end of "borderless" tech
Digital sovereignty is rapidly becoming a central pillar of national security across many nations, and the UK is no exception. The power of online platforms and the wider technology industry is not new, however the rise of AI is likely to multiply that power by increasing the ability of suppliers to process huge volumes of data and capture value. Governments are increasingly aware of the need to counterbalance this trend towards economic and political power being concentrated in online platforms, and this has forced jurisdictions to move away from their historically relaxed attitude to cross-border data exchange and reliance on a globalised, borderless IT infrastructure. AI firms have used regulatory gaps to "hoover up" huge amounts of (often copyrighted) data and online interactions, while attracting massive investments that will enable them to grow and take risks in what is fast becoming something of a digital “Wild West”.
It is worth highlighting that governments are less accepting of the "borderless" defence sometimes used by these companies. For example, in January 2026, the Ontario Superior Court ruled that OpenAI is subject to Canadian jurisdiction despite its US-based servers. This landmark decision echoes the global move toward repatriating power, as seen in Japan’s 2025 AI Promotion Act and Chile’s recent "Sovereignty Clause" for public sector AI data.
Turning policy into practice
Nations are attempting to turn this aspiration of greater digital sovereignty into action in various ways. In the UK, the transition is visible through the enforcement of the Online Safety Act and the expansion of sovereign compute facilities like the DAWN supercomputer. These are modest but necessary steps. By providing even a limited amount of public sector compute, the state begins to ensure it can audit AI tools for critical services without being entirely forced to rely on the "black box" proprietary systems of dominant firms. Australia has gone further, implementing a "Sovereign Capability Requirement" in December 2025 that mandates algorithmic auditing for all high-risk government procurement.
The three regulatory catches
Three distinct "catches" complicate this transition. First, the technology industry has mounted intense lobbying which often aligns with a populist brand of economic nationalism. This leads to the second catch: a reactionary stance from the US administration. In December 2025, the US State Department issued visa bans against European regulators, including former Commissioner Thierry Breton and Imran Ahmed of the CCDH. By framing these officials as if they were international criminal lynchpins, the US has signalled that it views the regulation of its tech bastions as a direct attack on its economic power.
The third catch is the rise of the "Discoursocracy." This phenomenon describes the tendency for governments to treat high-decibel online chatter as a democratic mandate. We saw this in the 2025 deepfake election cycles in Romania and the Czech Republic, where viral outrage led to reactionary policy pivots rather than evidence-based solutions. When outrage dictates policy, platforms effectively become participants in governance, often to the detriment of long-term stability in the real world (or "IRL," as the gamers might say).
Toward aovereign xollaboration
Regulating a borderless industry requires "minilateralism"—working within blocs of like-minded partners to set shared standards. Digital excellence in 2026 requires the courage to insist on a minimum level of digital independence. Whether through procurement standards or regulatory blocs, the goal is to ensure that the smarter state remains an autonomous one.
References (if needed)
- EU 'strongly condemns' US sanctions against five Europeans: https://www.courthousenews.com/eu-strongly-condemns-us-sanctions-against-five-europeans/
- AI Opportunities Action Plan: https://www.gov.uk/government/publications/ai-opportunities-action-plan/ai-opportunities-action-plan
- AI Plan for the Australian Public Service 2025: https://www.digital.gov.au/ai-plan-australian-public-service-2025-appendix-plan-deliverables
- Canadian News Media Companies v OpenAI (Jurisdiction Motion): https://www.litigate.com/canadian-news-media-companies-v-openai-jurisdiction-motion/pdf
- Digital sovereignty (POSTnote Research): https://post.parliament.uk/approved-work-digital-sovereignty/
- Populism, Media Revolutions, and Our Terrible Moment: https://www.youtube.com/watch?v=d8PndpFPL8g
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