Your synced data stays in your private iCloud account. Arcs has no data servers and does not receive or inspect the content being synced.
What CloudKit is doing
CloudKit is Apple’s infrastructure for syncing app data through iCloud. Arcs uses it so one Arc can remain available across your Apple devices without creating a separate Arcs account or storage service.
What remains on-device
Syncing the material and understanding the material are different jobs. The intelligence and processing happen on your hardware. CloudKit carries the private app data between devices when sync is enabled.
You control whether sync is used
If you leave sync off, your arcs stay only on the device where they were created. You can change the setting inside Arcs.