Not So Immutable? EU Passes Bill Requiring Smart Contracts to Have Kill Switch

Industry experts said that the bill raises a lot of fundamental questions.

A man standing on a giant doll inside of a digital world. 
  • The bill doesn’t target crypto but still has a clause related to smart contracts.
  • A kill switch implementation into smart contracts would greatly affect the industry.
  • The bill isn’t in its final form yet.

One of the core value propositions of blockchain technology is immutability – the ability to remain unchangeable under any circumstances.

However, a recent bill passed by the European Union (EU) is set to challenge the notion of immutability.

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Blockchain developers are facing increasing regulatory pressures. The European Parliament voted on Tuesday to pass the Data Act, which has a clause requiring smart contracts to have a kill switch.

A kill switch would effectively allow any smart contract to be shut down and have its activity reset, directly affecting immutability.

The new legislation isn’t explicitly directed toward regulating the cryptocurrency industry but focuses on data regulation for connected devices, also known as the Internet of Things

However, crypto experts fear that the smart contract clause can enormously impact the crypto space.

Bill Raises Key Questions

Thibault Schrepel, an associate professor at VU Amsterdam University, was one of the most vocal critics of the EU’s decision to include smart contracts in the Data Act.

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Schrepel said on Tuesday on Twitter that the immutability aspect of smart contracts is “key to their survival and that the legislation goes “a step too far in.”

“Article 30, as currently drafted, goes a step too far in addressing the issues raised by immutability. Instead of enacting “practical immutability”, it makes alterability the principle. In doing so, it endangers smart contracts to an extent that no one can predict.”

Schrepel also said the current legislation fails to specify who should hit the kill switch in an emergency.

“Is it the creator of the smart contract? Public authorities? Courts? If the EP wishes to proceed with Article 30, future versions should at least make it clear that only the creator of a smart contract can terminate it.”

Curve, one of the battle-tested decentralized finance (DeFi) platforms in the market, responded to the news by saying that it’s “impossible to comply” with such requirements as having a kill switch.

However, the bill has yet to be in its final form. The new legislation will now go through bilateral negotiations during which EU institutions can negotiate over the bill’s final form.

On the Flipside

  • As evident from the multiple questions it raises, the new bill is far from its final form regarding smart contracts. With sufficient attention from the industry, EU institutions can edit the legislation to give more clarity.

Why You Should Care

Forcing smart contract developers to include a kill switch in code would harm how smart contracts run today. Industry believers think that for crypto to stay relevant, all its core values, including immutability, should be protected at all costs.

Read more about crypto regulation in the EU:
EU Intends to Implement Crypto Capital Banking Regulations by 2025

Read more about Binance’s recent issues:
Another Blow: Binance to Suspend GBP Services Next Month

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
Arturas Skur

Arturas Skur is a cryptocurrency news reporter at DailyCoin who covers Web 3.0 domains, DeFi, and Ethereum Layer-2s. With over five years of experience in journalism and public relations, Arturas brings his critical thinking and analytical abilities to deliver insightful news stories. In his free time, he enjoys hiking, playing with his dog, and reading.