I once asked Hetzner, do they have protections in place against a rogue employee peeking at data inside my servers, as I was worried about some sensitive data stored in there. Their response was: "If you are asking that question, you are probably mining crypto, so we'll ban you".

Similar experience with Hetzner. They seem to be extremely ban-happy. I get banned when I first sign up for no particular reason other than I tend to have my VPN on. After emailing support and providing identification, I still got banned after changing my billing to use privacy.com

Yikes. How do we make an informed choice for a not ban-happy provider, especially since Indian id cards seem to be rejected?

I suppose you could stick with AWS or Azure. I ended up using the VPS that sponsors mailcow (eth-services.de) which is slightly more expensive by a few cents

I know AWS maintains a strong reputation, but whats special about eth-services.de?

Have all my stuff there (bare metal), can recommend.

same, using it for years. Its great

If this is the case, is there a way to protect against it? Is there a way to keep the data encrypted? Thinking along the lines of bitlocker on windows.

No. VM snapshots include RAM as well, so the decryption key can be copied from there. The decrypted data can also be intercepted when you decrypt it.

Without the pipe dream of efficient homomorphic encryption you can’t protect your data from a hostile VPS provider.