CLOUD Act and Data Protection: Encryption Doesn’t Guarantee Sovereignty

In Canada, digital sovereignty is drawing growing attention, as protecting sensitive data from foreign government interference has become a priority. In this context, data encryption is often presented as a strong solution, especially when data is entrusted to a U.S.-based cloud provider. But does encryption truly guarantee digital sovereignty?

What is encryption?

Encryption is the process of making information unreadable using a mathematical algorithm and a secret key. Without that key, the data cannot be accessed, and confidentiality is protected. In practice, encryption is used at two key moments:

• In transit (for example, during a secure web connection)

• At rest (for example, stored in a database)

Most operating systems, mobile devices, and cloud services now include some form of encryption. In a cloud environment, encryption is a foundational baseline control, and it is recommended by the Canadian Centre for Cyber Security.

Encryption to protect our data: a good digital sovereignty strategy?

To remain truly effective over time, an encryption strategy depends on two fundamentals: key management and algorithm choice.

Control of encryption keys
Confidentiality is only assured if the encryption key remains under the control of the data owner, not the service provider. For example, in certain end-to-end encrypted messaging applications, keys are stored on the user’s device.

By contrast, when encryption keys are stored in a provider’s cloud, they may become accessible to third parties; for instance, following government requests in the context of an investigation.

Choice of algorithms
Common encryption algorithms such as RSA or ECC are secure against classical computers. However, the emergence of quantum computing represents a real medium-term threat: these algorithms could potentially be compromised in a very short time. That is why transitioning to post-quantum algorithms is essential to counter “harvest now, decrypt later” strategies. These approaches involve collecting encrypted data today, with the intention of decrypting it later when technology makes it feasible.

In other words, data encrypted today could become readable tomorrow, which reinforces the importance of maintaining full control, even when data is encrypted.

Encryption is not sovereignty

Is encryption an adequate measure to achieve digital sovereignty? Let’s look at the question from four angles:

1. Data subject exclusively to our laws → NO
Encryption does not affect the laws to which data may be subject. A critical element of digital sovereignty is ensuring that data remains, at all times, exclusively under Canadian jurisdiction. Foreign providers (including their Canadian subsidiaries) can still be subject to the laws of their country of origin—laws that may conflict with Canadian requirements. Consider, for example, the U.S. CLOUD Act, which can compel a U.S. company to provide data to government authorities. Even if data is encrypted and hosted in Canada, it may still be subject to foreign laws.

2. Protection of the IT supply chain → NO
In cloud and software-as-a-service environments, encryption does not mitigate the risk of a service disruption or “kill switch” scenario triggered by a foreign government. The operational autonomy of our IT systems can remain exposed to potential commercial coercion from international partners.

3. Economic benefits → NO
Encryption does not prevent economic leakage. Working with a local provider generates meaningful economic benefits that cannot be matched to the same extent by a foreign provider. U.S.-based technology providers will continue to export profits to their headquarters—whether your data is encrypted or not.

4. Data protection → PARTIALLY
Encryption is one of the core best practices in cybersecurity. Strong algorithms (including post-quantum over time) and customer-controlled key management are effective mitigation measures against unauthorized access. But encryption does not make data sovereign. As explained in point 1, if the provider remains subject to extraterritorial laws, the data may still be exposed from a legal standpoint, regardless of where it is stored, even if it is encrypted.

Encrypting data is only part of the equation

Like a padlock on a suitcase, encryption prevents unauthorized access to the contents. But as soon as the suitcase crosses a border, its contents become subject to the jurisdiction of the host country, padlock or not.

Ultimately, data sovereignty is achieved through complementary factors that must be considered as a whole. Just as geographic data residency alone is not sufficient, encryption is not a guarantee of sovereignty, nor does it replace the other mechanisms that must be put in place.

Encryption remains an effective measure to protect sensitive information, but it should be seen as only a partial response to digital sovereignty challenges. Public and private organizations are responsible for protecting their data beyond encryption, and they can rely on Micrologic’s sovereign cloud to help them do so.