The European Parliament’s Data Act and Its Impact on Smart Contract Development

The European Parliament’s Data Act and Its Impact on Smart Contract Development

The European Parliament recently announced its approval of the Data Act, a legislation that covers various aspects, including regulations for smart contract development. This article delves into the potential implications of the Data Act on the blockchain sector, as well as the concerns raised by industry members.

With a majority vote of 481 in favor and 31 against, the European Parliament has adopted the Data Act. However, formal approval from the European Council is still required for the act to become law. The act’s impact on the blockchain industry remains unclear as the press release does not specifically address this. Nonetheless, Article 30 of the Data Act outlines essential requirements for smart contracts related to data sharing.

The Data Act has faced criticism from certain members of the crypto industry, particularly the European Crypto Initiative (ECI). One major concern raised is that the Act could impose far-reaching requirements on smart contract developers and deployers, even if they lack the means to comply. The ECI has noted that this could lead to an unjust burden on developers who are unable to fulfill these requirements.

Furthermore, the Data Act introduces a requirement for a “kill switch” that allows for the safe termination or interruption of smart contracts. The ECI argues against this provision, stating that blockchain-based smart contracts are designed to be immutable and resistant to termination. Introducing a kill switch would introduce a single point of failure and increase the risk of exploitation.

Another point of contention is the potential equivalence drawn between smart contracts and legal contracts in the Act. The ECI disagrees with this notion, emphasizing the fundamental differences between the two. Additionally, the Act’s requirement for smart contracts to handle data in accordance with trade secret protection rules is met with objection from the ECI.

Despite the possibilities set forth by the Data Act, the means of enforcement by EU government agencies remain unclear. It is uncertain how strictly these rules will be enforced, if at all. However, the introduction of overly strict regulations may prompt European blockchain companies to consider relocation to jurisdictions that offer more favorable conditions.

The European Parliament’s approval of the Data Act has prompted debates and concerns within the blockchain community. While Article 30 of the act lays out requirements for smart contracts, the consequences of these regulations on the industry remain uncertain. The objections raised by the European Crypto Initiative highlight potential issues, such as burdensome compliance requirements and the introduction of a kill switch. As the legislation moves towards formal approval, the blockchain sector awaits further clarification on enforcement and the ultimate impact of the Data Act.


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