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My question is the following: If I use FileVault, will it only protect the data which is not uploaded to the iCloud, or will files uploaded to the iCloud be encrypted? If all files stored in the iCloud can be accessed through the iCloud, then setting up FileVault only makes limited sense, right?

This is given the fact that I do not store my key in the iCloud, of course.

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iCloud and any other computer system writes data to your local disk and reads it back later when you try to access the file. FileVault encrypts the data when it is written, and decrypts it when it is read.

FileVault is a local encryption system, designed to protect against someone stealing your computer. Without FileVault, someone could access your files with physical access to your computer.

You are correct that it does not have any effect on the files stored in iCloud, while they are in the cloud. However, the local copies of the files will be protected in the same way as any other file.

You should always set up FileVault, since it will protect the files that are locally stored on your computer.

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iCloud and FileVault really don't rely on each other.

iCloud is encrypted by default. Someone would have to have your authentication credentials to access your files in iCloud. You encrypt your local machine with FileValut to ensure anyone who gets their hands onto your machine has an infinitesimally small chance of accessing your data. FileVault is about encrypting your local files.

For further details regarding iCloud Security, see Apple Support: iCloud data security overview:

iCloud uses strong security methods, employs strict policies to protect your information, and leads the industry in using privacy-preserving security technologies like end-to-end encryption for your data

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