It's not being sent anywhere, it uses continuity... if you copy something, for the next few min if you try to paste on another device, it encrypts it and sends it directly to that device. No content is uploaded to iCloud. Nothing is sent to any other device unless you try to paste within a few min of copying.
http://arstechnica.co.uk/apple/2016/09/macos-10-12-sierra-review-os-x/4/#h3Does anybody actually know how this works rather than just assuming?
I share OP's privacy concerns.
It does work only through bluetooth? It doesn't work for me through wi-fi :/ . Am I something wrong? I have ios 10 and handoff activate.