Meeting Data Residency Requirements in Blockchain Networks

As blockchain technology continues to gain adoption, questions about data residency and data protection become increasingly important. Data residency refers to the legal and regulatory requirements for data to be stored within a particular geographic location or region. In the context of blockchain, this can be particularly challenging since the data is often distributed across multiple nodes and jurisdictions.

What is data residency?

Data residency requirements can vary widely depending on the country and industry. Some countries require that certain types of data must be stored within their borders for legal or national security reasons. For example, in the European Union, the General Data Protection Regulation (GDPR) requires that personal data be stored within the EU or a country that is deemed to have an adequate level of data protection.

In the context of blockchain, data residency requirements can be particularly challenging. Public blockchains, such as Bitcoin and Ethereum, are decentralized and distributed across many nodes around the world. This means that it can be difficult to determine where the data is physically located at any given time. Permissioned blockchains, which are typically used by enterprises, can be more centralized, but still present challenges for data residency compliance.

How Kaleido can help you meet regulatory requirements

To comply with data residency requirements, organizations can employ a range of data protection strategies. Here are a few examples:

Encryption

One strategy is to encrypt the data before it is stored on the blockchain. This can help ensure that the data remains secure even if it is stored outside of the region. However, it is important to ensure that the encryption keys are also stored within the region to comply with data residency requirements.

Hybrid Cloud

Another strategy is to use a hybrid cloud approach, where some data is stored on-premises and some is stored in the cloud. This can allow organizations to keep sensitive data within the region while still taking advantage of the scalability and cost benefits of the cloud.

Data Minimization

Organizations can also minimize the amount of data that is stored on the blockchain to reduce the risk of non-compliance with data residency requirements. This can involve using techniques like hashing or truncation to store only a portion of the data on the blockchain.

Legal Compliance

Finally, organizations can work with legal experts to ensure that their blockchain implementation complies with local data residency requirements. ?

Data residency vs. data sovereignty

Data residency refers to the physical or geographical location where data is stored, often in accordance with regional compliance requirements. Organizations might be obligated to store data within specific national boundaries, but the government doesn't necessarily have jurisdiction over the data.

Data sovereignty, on the other hand, is a legal concept where data is subject to the laws of the country in which it is located. This means the country's government has the legal authority to access and control that data, and it must be processed and handled according to local laws. In essence, while data residency focuses on the physical location of data, data sovereignty emphasizes the legal control and jurisdiction over that data.

Final thoughts

Data residency requirements can present challenges for organizations using blockchain technology. However, by employing a range of data protection strategies, organizations can minimize the risk of non-compliance and ensure that their blockchain implementation meets regulatory requirements.

Kaleido provides a wide variety of deploy options which can ensure that your digital asset strategy is aligned with data privacy and residency requirements. Specifically, the Kaleido Asset Platform allows for even greater flexibility in how you create and manage data.

If you’re interested in discussing data residency and the tools that are available to enable compliance, schedule a talk with one of our solutions architects: Nick Gaski or Bob Blessing-Hartley (he/him) .