EU Parliament on Smart Contracts: Data Act Is “Not Problematic”

Speaking to Daily Coin, an EU Spokesperson tried to allay the fears of smart contract vendors.

Happy and confident man showing the thumb up infont of the EU parliament.
Created by Gabor Kovacs from DailyCoin
  • The EU’s Data Act contains a worrying provision for smart contracts.
  • A spokesperson has told DailyCoin that article 30 is “not problematic”.
  • There is still some time before full clarity is offered.

Crypto regulation is an evolving topic globally, with different jurisdictions taking varied approaches. In Europe, one of the first crypto frameworks, MiCA, has been launched, but work still needs to be done. 

The EU’s Data Act sent shockwaves across the crypto, and especially the DeFi sector, in April. Article 30 of the Act stated that smart contracts should be required to have a “safe termination or interruption” mechanism integrated, also known as a kill switch.

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However, in conversation with DailyCoin, the European Commission has allayed some concerns. 

“Not Problematic” 

The European Commission continues to hash out the details around the Data Act, with one commissioner, Thierry Brenton, recently tweeting about a meeting concerning the Act.

DailyCoin reached out to Brenton, and a Commission Spokesperson replied on his behalf, stating: 

“The essential requirements in Art 30 of the Data Act are quite high-level, and they should not be problematic for the vendors of smart contracts software and blockchain.”

More so, the spokesperson also clarified the scope of the Data Act, which appears quite broad and would cover both ‘centrally operated or distributed’ ledgers. 

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“The new provision of the Data Act on smart contracts is intended to cover software, which is used to automatize the execution of contracts (in the context of data sharing), whether it employs a centrally operated or distributed electronic ledger (such as blockchain), and is not limited to data coming from IoT objects,” they added. 

When the Act was heard to be aimed at smart contracts, the outcry from the blockchain community led to Polygon Labs sending an open letter to EU lawmakers asking them to consider amendments in Article 30.

Protect Permisionless Smart Contracts

Polygon Labs said that the Data Act should exclude the mention of software developers and apply only to permissioned smart contracts and enterprises.

It is uncertain if the EU Parliament is adhering to Polygon’s requests while the act is being contemplated. However, it appears that the EU’s stance aims to maintain innovation while protecting user interests. 

If the spokesperson’s words are to be interpreted optimistically, the requirements of Article 30 being “not problematic” should mean the protection of the essential functionality of smart contracts. 

On the Flipside

  • The provisions on smart contracts in the Data Act are meant to prevent accidental or fraudulent transactions.
  • While EU lawmakers are not targeting blockchain technology per se, their actions could undermine one of the core propositions in crypto.

Why This Matters

If the EU mandates a kill switch on smart contracts, protocols in the EU will need to be designed so that developers can step in and alter their transactions. This is against the very principles of permissionless blockchains and is not feasible. 

Read more about Polygon’s letter to the EU:

Polygon Wants EU to Amend Data Act to ‘Protect’ Smart Contracts

Read more about the battle between Winklevoss and Silbert:

Winklevoss vs. Barry Silbert: Ripple Lawyer Calls on Cameron to Sue

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Darryn Pollock

Darryn Pollock is a South African-born, UK-based journalist and content writer for DailyCoin with a focus on regulation and legislation revolving around the cryptocurrency space. He has covered the evolving crypto regulatory space, and examined how the US has approached law-making to offer protection in the growth of innovation. Darryn values traditional journalistic principles of truth, accuracy, independence, fairness, and impartiality, and has a Bachelor of Arts degree in Journalism and Law from Rhodes University in South Africa.