In a world where data transcends borders at the speed of light, understanding both where your data lives and who governs it is crucial. Data residency and data sovereignty are two sides of the same coin—and recent laws like the U.S. CLOUD Act and China’s Cybersecurity Law, Data Security Law, and PIPL have raised the stakes even higher. For governments or companies in regulated industries, ensuring that data do not leave national borders is of the highest strategic importance.
What Is Data Residency?
Data residency refers to the physical location where data is stored. Whether housed in a Singapore data center or an AWS region in Frankfurt, residency defines the geographic location of your information.
Cloud providers equip customers with region-specific controls—geo-fencing, dedicated sovereign-cloud offerings, and data-center choices—to keep data within mandated borders and improve performance for local users.
What Is Data Sovereignty?
Data sovereignty is about the legal jurisdiction that applies to data. It asserts that any data stored within a nation’s borders falls under that country’s laws, regardless of data ownership or where the controller resides.
For example, if a multinational stores customer records in a U.S. data center, U.S. authorities can compel access under American law—even if those records belong to non-U.S. persons.
Key Global Legislation Impacting Data Sovereignty
United States: The CLOUD Act
The Clarifying Lawful Overseas Use of Data (CLOUD) Act, enacted in March 2018, empowers U.S. law enforcement to compel U.S.-based tech companies to hand over data—no matter where it’s stored geographically. This extraterritorial reach can conflict directly with foreign privacy regimes like the EU’s GDPR, creating a legal dilemma for providers and customers alike. Therefore, there exist a possibility of interference by foreign governments, to compel foreign-owned cloud providers to hand over data.
China: Cybersecurity Law, Data Security Law, and PIPL
China’s “Three Fundamental Laws” form a comprehensive sovereignty framework:
- Cybersecurity Law (CSL 2017) mandates localization of certain network data and robust security measures.
- Data Security Law (DSL), promulgated June 10 2021 and effective September 1 2021, establishes data classification, national-security reviews, and stringent export controls.
- Personal Information Protection Law (PIPL 2021) imposes strict rules on personal data handling, cross-border transfers, and consent requirements. These laws together ensure that data generated or stored in China remains subject to local oversight and control.
Residency vs. Sovereignty: A Quick Comparison
Concept | Data Residency | Data Sovereignty |
Definition | Physical location of stored data | Legal jurisdiction governing that data |
Governing Factor | Geography | National laws and regulations |
Critical Concern | Latency, performance, local-law storage | Compliance with local data access rights |
Example | Storing EU user data in AWS Frankfurt | U.S. authorities compelling Azure to comply with a CLOUD Act warrant |
Why You Should Care
- Regulatory Fines
Failure to honor local residency or sovereignty laws can trigger penalties. - Operational and Security Risks
Unintended exposure to foreign government access or supply-chain vulnerabilities undermines data governance and customer trust. - Competitive Differentiation
Demonstrating rigorous residency and sovereignty compliance builds credibility in sectors like finance, healthcare, and the public sector.
A Case Study : TikTok
To satisfy the US government’s concerns that data on US citizens held by TikTok may be accessed by China, TikTok repatriated data to Oracle Cloud. This satisfied data residency requirements.
However, data sovereignty is still a concern. The US government believes that TikTok, a China-based tech company, will hand over data if compelled by China, even if data is stored on US soil. Hence, a forced-sale of TikTok to American owners is being considered, in order to satisfy data sovereignty concerns.
Crafting a Compliant Strategy
The major hyperscalers today are either US-based or China-based. Data sovereignty cannot be guaranteed by these hyperscalers.
A Cloud Service Provider, operating in-country with local infrastructures, and not beholden to any foreign government, is the surest way of providing true data sovereignty. Starview Technologies, together with CloudSigma, is on track to build 1STACK, a true sovereign cloud in Singapore and Johor Bahru (Malaysia).
Contact us today if you want to learn more about data residency and sovereignty, or learn more about our 1STACK cloud offerings.
