An Assessment of the National Security Impact of Digital Sovereignty

By Kathleen Cassedy, Ian Conway

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Kathleen Cassedy is an independent contractor and open source specialist. She spent the last three years identifying, cataloging, and analyzing modern Russian and Chinese political and economic warfare efforts; the role of foreign influence operations in gray zone problem sets; global influence of multi-national entities, non-state actors, and super-empowered individuals; and virtual sovereignty, digital agency, and decentralized finance/cryptocurrency. She tweets @Katnip95352013.

Ian Conway manages Helios Global, Inc., a risk analysis consultancy that specializes in applied research and analysis of asymmetric threats. Prior to conducting a multi-year study of political warfare operations and economic subversion, he supported DoD and homeland security programs focused on counterterrorism, counterproliferation, hard and deeply buried targets, and critical infrastructure protection.

Divergent Options’ content does not contain information of an official nature nor does the content represent the official position of any government, any organization, or any group.

Title: An Assessment of the National Security Impact of Digital Sovereignty

Author and / or Article Point of View: The authors believe that traditional notions of citizenship and sovereignty are rapidly changing and that the U.S. could gain competitive advantage by embracing a tiered citizenship model, including e-residency.

Summary: Money, people, and companies drove globalization’s disruption of centuries of power domination by nation-states, while increasing the agency and autonomy of corporations and individuals. The balance of power has shifted, and if governments do not learn how to adapt, they will be relegated to the back seat in influence and decision making for this century. One opportunity for adaptation lies in embracing, not rejecting, digital sovereignty.

Text: In the past 25 years, the globalization of the world’s economic systems and the introduction of Internet ubiquity have had profound effects on humankind and centuries-old governance structures. Electronic commerce has transformed international supply chain dynamics and business finance. Physical borders have become less meaningful in the face of digital connectedness and supranational economic zones. The largest multinational corporations have market caps which challenge or exceed the gross domestic product of most of the countries in the world. These changes have made international transactions – and investments – executable with the click of a button, transactions that once required weeks or months of travel to finalize.

Facilitating and empowering the citizens of the world to engage in the global marketplace has created a new dynamic. This dynamic involves the provision of safety and security of the people being increasingly transferred to the private sector thus forcing governments to outsource their most basic sovereign responsibility and reserving the most complete and effective solutions for those who can afford them. This outsourcing includes fiscal security (or social welfare), especially in free market economies where the responsibility for savings and investment is on the individual, not the government. As safety and security – personal and fiscal – becomes further privatized, individuals are taking steps to wrest control of themselves – their identities, their businesses, and their freedom of movement – from the state. Individuals want to exercise self-determination and attain individual sovereignty in the globalized world. This desire leaves the nation state, particularly in western democracies, in a challenging position. How does a government encourage self-sufficiency (often because states can no longer afford the associated costs) and democracy when globalized citizens are redefining what it means to be a citizen?

The first war of the 21st century, the Global War on Terrorism, was one of individuals disenfranchised from the state developing subnational, virtual organizations to employ terror and insurgent tactics to fight the nation states’ monopoly on power. The second war – already well underway but one that governments have been slow to recognize and engage – is great power competition short of kinetic action, to remake the geopolitical balance of power into multi-polar spheres of influence. The third war this century may likely be over amassing talent and capital, which in turn drives economic power. America’s near-peer adversaries, particularly China[1], are already moving aggressively to increase their global hegemony for this century, using all means of state power available. How can America counter its near-peers? The U.S. could position itself to exert superiority in the expanding competition for wealth by proactively embracing self-determination and individual autonomy as expressed by the digital sovereignty movement.

Digital sovereignty is the ultimate expression of free market capitalism. If global citizens have freedom of movement – and of capital, access to markets, encouragement to start businesses – they will choose the market and the society with the fewest barriers to entry. Digital sovereignty gives the advantage to countries who operate on free market capitalism and self-determination. Digital sovereignty is also an unexpected counter to China’s and Russia’s authoritarian models, thus disrupting the momentum that both those competitors have gained during the great power competition. In addition to acting as a disrupter in global geopolitics, proactive acceptance and adoption of digital sovereignty opens new potential tax and economic boosts to the U.S. Further, digital sovereignty could serve as an opportunity to break down barriers between Silicon Valley (particularly its techno-libertarians) and the U.S. government, by leveraging one of the tech elite’s most progressive socio-cultural concepts.

What might digital sovereignty look like in the U.S.? One approach is Estonia’s forward-looking experiments with e-residency[2] for business purposes but with the U.S. extending these ideas further to a tiered citizenship structure that includes U.S.-issued identity and travel benefits. One can be a citizen and contribute to the U.S. economy with or without living there. People can incorporate their business and conduct banking in the U.S., all using secure digital transactions. Stateless (by choice or by circumstance) entrepreneurs can receive travel documents in exchange for tax revenue. This is virtual citizenship.

The U.S. government could opt to act now to throw its weight behind digital sovereignty. This is a democratic ideal for the 21st century, and the U.S. has an opportunity to shape and influence the concept. This policy approach would pay homage to the Reagan-Bush model of free movement of labor. In this model, people don’t get full citizenship straight away, but they can legally work and pay taxes in the U.S. economy, while living where they like.

The U.S. government could create two tiers of citizenship. Full conventional citizenship – with voting privileges and other constitutionally guaranteed rights – could remain the domain of natural born and naturalized citizens. A second level of citizenship for the e-citizen could avoid the provision of entitlements but allow full access to the economy: free movement across borders, the ability to work, to start a business, to open a bank account. E-citizenship could be a path to earning full citizenship if that’s what the individual wants. If not, they can remain a virtual citizen, with some but not all privileges of full citizenship. Those who do wish to pursue full legal citizenship might begin contributing to the American economy and gain some benefits of association with the U.S., but they could do so from wherever they are currently located. This approach might also encourage entrepreneurship, innovation, and hard work – the foundations of the American dream.

Both historically and at present – irrespective of what party is in office – the U.S. has always desired to attract immigrants that want the opportunity to pursue a better life for themselves and their children through hard work. Life, liberty, and the pursuit of happiness: the foundational concept of the United States. Accordingly, if the U.S. is the first great power to embrace and encourage digital sovereignty, acting in accordance with core American values, then the U.S. also shapes the future battlespace for the war for talent and capital by exerting first-mover advantage.