Country could see 'withdrawal of global services and substantial economic losses'.
The Russian government has passed a bill that will require firms to store their data on citizens on servers located within the country's borders.
The bill, which was passed by both houses in Russian parliament, went through on Friday and asks companies to comply by September 2016 or face the risk of getting blocked.
The move is a clear message to non-Russian web services such as Google and Facebook that operate outside of Russia.
Russian MP Vadim Dengin told AFP: "Most Russians don't want their data to leave Russia for the United States, where it can be hacked and given to criminals. Our entire lives are stored over there."
However, by leveraging foreign web firms into using Russian-housed servers, approved only by the Russian government, the country could very easily gain access to all sorts of information about its citizens, as well as increasing the use of Russian rivals if non-Russian services pull out of the country.
Services such as Mail.ru, a competitor to Gmail, and Google counterpart Yandex could see a large userbase boost if American firms don't want to compy with the new legislation. Facebook and Twitter say they refuse to hand over the data of their users to governments and the move could have massive implications for those services too, boosting social network competitors like VKontakte, a service similar to Facebook.
Russia's Association of Electronic Communication (RAEC) said in a statement: "The law puts under question cross-border transmission of personal data. Passing similar laws on the localization of personal data in other countries has led to withdrawal of global services and substantial economic losses."