Prosperity, poverty, or paperclips

The past is a foreign country, and the future is unknown.  Nine years after Brexit, Britain remains Europe’s leading tech hub, home to leading AI labs, fintech unicorns, and a thriving ecosystem of startups and legal talent. But this strength is under threat — squeezed by the regulatory assertiveness of the European Union on one side, the scale of the United States on the other, and by the sheer magnitude of the tech-driven changes about to sweep our economy and society.

While Westminster debates policy frameworks and cautiously approaches innovation, events are moving fast. Respectable analysts predict AGI within the decade; some predict it within the next 5 years. No-one knows what will happen next. Best-case scenarios predict the automation of entire industries, and a world without work; the question of how these gains are to be distributed is yet unanswered. To prosper, we must grow and innovate at ever faster speeds; to survive, we must develop laws that balance innovation with safety. Clippy is better as an internet meme, not a prophecy. 

Other countries are moving at pace. The white-hot technology sectors of China and the United States are pouring billions into the development of computing infrastructure and new algorithms. Small and nimble jurisdictions such as Dubai & Singapore are working to attract the companies, talent, and capital that will define the next era of computing. They are moving to seize the future, and so too must we.

If we cannot grow our economy, we cannot have prosperity. If we cannot build and scale companies, other countries will gain the benefits from automation. If we cannot create the right rules for AI & the digital economy, then we risk a dystopian future.

Our economic, social, and strategic security demands that we act - but our state institutions are slow, our economy is lethargic, and our productivity is now. Our challenges cannot be solved by the central government alone. Nor can they be solved by waiting for perfect policies.

Britain’s hidden advantage: the innovation islands

Yet Britain holds a unique strategic asset: its extended family of Crown Dependencies and Overseas Territories. These small but highly sophisticated jurisdictions — Jersey, Guernsey, the Isle of Man, the Cayman Islands, Bermuda, and others — are rarely discussed in the context of national tech strategy. That must change.

With their legislative agility, legal autonomy, and deep financial expertise, these jurisdictions offer Britain a ready-made solution to the problem of scale and speed in digital regulation. They can serve as agile laboratories for the development of legal frameworks governing digital assets, AI governance, and next-generation data infrastructure. In doing so, they can act as catalysts for growth in Britain’s most strategically important sectors.

The case for agile jurisdictions

The UK’s current model of regulation is a product of its size, democratic structure, and caution — a structure designed for stability, not speed. But emerging technologies evolve on a faster cycle than laws can typically accommodate. Blockchain-based financial tools, AI-powered agents, and privacy-enhancing data platforms do not wait for five-year white paper cycles or multi-stage consultations.

The analogy with software development is useful. Once, companies built software using the “waterfall” model: rigid planning, long delays, and a high risk of failure. That model gave way to “agile” development — small, iterative changes tested quickly, allowing for faster, user-centric improvement.

Britain must do the same in regulation. It must shift from a waterfall model of policy — slow, top-down, and monolithic — to an agile model that allows for experimentation, feedback, and scaling of what works. But unlike a startup, the UK cannot afford to make high-risk bets at national scale. What it can do is experiment through its smaller, sovereign-adjacent jurisdictions.

The Crown Dependencies and Overseas Territories have the necessary ingredients: legal autonomy, skilled professionals, and streamlined legislative procedures. Many already have experience in financial innovation. With strategic alignment, they could go further and become launchpads for Britain’s digital regulatory strategy.

Using the CDOTs, the UK can:

• Prototype new regulatory frameworks in small jurisdictions

• Run real-world pilots with actual firms under live conditions

• Observe outcomes, collect feedback, and revise accordingly

• Scale up successful frameworks through mutual recognition or adoption by the UK

• Export its services to CDOT based companies, and the wider world
  

Federated innovation

Using these jurisdictions, Britain can model itself on the best practices of resilient systems: diversify experimentation, learn quickly, and scale what works.  We see parallels to the concept of federated learning in AI — where different systems experiment locally, share learnings centrally, and improve as a network.

Historically, countries that embraced regulatory pluralism — such as the early United States, with its state-by-state banking charters, or Switzerland with its cantonal experimentation — made faster gains in institutional innovation. Jurisdictional competition, when well-managed, is not a threat to cohesion; it is a stimulus for creativity.

Working together, the UK and CDOTs could trial legal frameworks for fast-moving sectors (digital assets, data intermediaries, AI). UK regulators and Parliament could observe, support, and learn, enabling the CDOTs and UK to learn and innovate more quickly. Proven frameworks can be scaled or mutually recognised in the UK, ensuring economic growth for both.

This is not fragmentation. It is federated innovation.

Digital assets, AI, and data markets: the strategic opportunity

Three of most transformative technologies of the next decade — digital assets, artificial intelligence, and data intermediaries — are not just technical tools. They are political and legal questions. How a nation defines property rights in digital tokens, liability in AI decisions, or privacy & right in data markets will shape its place in the global economy.

Britain has the potential to lead in all three — if it can move fast enough.

Digital assets

The BVI and Cayman Islands are already digital asset leaders, and the Crown Dependencies too have a foothold in the world of tokenised finance. They host crypto funds, fintech startups, and digital asset platforms. All could go further. British jurisdictions could lead the world in creating legal wrappers for DAOs (Decentralised Autonomous Organisations), classifying digital tokens with precision, and building financial sandboxes for the issuance of stablecoins and tokenised real-world assets.

The global capital that such innovation would attract — venture investment, institutional funds, and startup formation — would not be limited to the islands. British law firms would structure the deals, British developers would write the smart contracts, and British banks would service the payment rails. In other words, the benefits would spill over directly into the UK’s legal, financial, and professional services economy.

AI governance

As artificial intelligence becomes more integrated into decision-making systems, the need for regulation intensifies. But regulation must be iterative, not paralytic. The islands could become safe testing zones for novel approaches to AI assurance — from public registries for large language models, to licensing regimes for high-risk AI systems, to legal structures that assign responsibility to autonomous agents.

These efforts would give the UK an empirical foundation for national policy, while creating opportunities for British AI firms, consultants, and universities to support the work — and for the UK itself to lead globally in AI safety infrastructure.

Data intermediaries

The third area of opportunity is perhaps the most structurally transformative: the rise of data intermediaries. As the UK considers new legislation to enable data sharing through trusted intermediaries, the islands could trial these frameworks in practice. Indeed, they already are - Jersey and the Isle of Man have created data trusts and data asset foundation.

The possibilities are endless include privacy-preserving data vaults, personal data unions, and new fiduciary roles for handling user data.

By piloting this future in a controlled environment, Britain could avoid the mistakes of over-centralisation and under-regulation — and help shape the architecture of a more equitable data economy.

Spillover and sovereign synergy

It’s tempting to think of regulatory innovation in the islands as being “offshore” — distant, isolated, or separate from Britain’s domestic concerns. But that is a false dichotomy. In truth, capital, expertise, and ideas are inherently networked. When the islands attract new firms, those firms hire UK lawyers, use UK infrastructure, consult UK auditors, and partner with UK universities.

The British economy is not separate from its legal periphery — it is amplified by it.

Moreover, the islands provide a credible platform for experimentation. They are trusted, well-regulated, and globally connected. By testing new legal ideas there first — and importing successful ones to the UK — we reduce national risk while dramatically increasing our capacity to innovate.

This is what federated innovation looks like: a network of jurisdictions, each moving at its own pace, but aligned in purpose. When it works, it allows for rapid learning, resilient design, and sovereign agility.

The UK should take strategic leadership of CDOT tech innovation. That means establishing:

• Clear channels of communication between UK departments (DSIT, Treasury, FCA) and the Dependencies

• Mechanisms for soft alignment on shared principles (e.g., safety, transparency, competitiveness)

• An “override clause” whereby the UK can intervene in rare cases of systemic or reputational risk
  

Backing the British family

The more support the British state can give to digital innovation in the CDOTs, the more it will receive in return. By scoping projects, providing investment, and lending regulatory personnel & resourcing, it can supercharge the pace of CDOT innovation.

On the international stage, the UK can use its market size and diplomatic weight to support the expansion of CDOT based regulatory models

A new policy infrastructure

To make this real, a new policy infrastructure is needed — a forum or task force that connects UK regulators, policymakers, legal experts, and their counterparts in the Crown Dependencies and Overseas Territories.

Such a group could:

• Draft model legislation for emerging technologies

• Share regulatory intelligence and sandbox learnings

• Create soft-alignment frameworks across jurisdictions

• Recommend successful policies for UK national adoption
  

In other words, it would be a new layer of governance: agile, multilateral, and mission-driven. With the right leadership and vision, this could become the engine room of British tech sovereignty.

Conclusion: a new British model

For centuries, Britain exported legal and institutional models to the world — from the common law to the limited company. Today, that influence is challenged by newer, faster-moving powers. But it can be renewed.

To lead again, Britain must harness every advantage it has — not just in London, but across its entire legal and constitutional family. The Crown Dependencies and Overseas Territories are not remnants of empire. They are forward-operating platforms of innovation. If empowered and integrated into a broader strategy, they could help Britain redefine the future of law, technology, and sovereignty.

This is not a call to decentralise the nation. It is a call to expand its regulatory surface area, learn more quickly, and act more decisively.

The islands are small. But the opportunity is vast.

And the time is now.