EU Data Act Draft Poses Challenge to Smart Contracts

EU Data Act Draft Poses Challenge to Smart Contracts

The revised EU Data Act draft introduces regulations for smart contracts, potentially challenging their nature once and for all.

The European Union (EU) member countries introduced a restructured version of the Data Act draft on Monday, integrating smart contract regulations that may pose significant challenges for most existing smart contracts to comply with. This development has generated apprehension within the blockchain ecosystem, as it could potentially compromise the fundamentals of automated and immutable programs.

The EU Council, comprising representatives from the national governments, reached a consensus on the text last Friday. The council’s proposed measures seem to align with the preferences of the European Parliament, setting the stage for the ultimate negotiations between the two entities, facilitated by the European Commission.

A major point of contention in the proposed legislation is the mandate for smart contracts to possess the ability to pause or cease their operations. This spiked concerns among the blockchain community, as it might undermine the intrinsic nature of smart contracts. Smart contracts are inherently designed to be self-executing and unchangeable.

Erik Slottner, the Swedish minister who led the council discussions, stated on Friday that the objective of the new law is to enable effortless data flow within the EU and across various sectors. That could allegedly benefit businesses, researchers, public administrations, etc.

Ambiguous Regulations

The revised regulations primarily focus on contracts that provide data access for the management of smart-home devices, such as vehicles and refrigerators. However, the actual scope of these regulations remains ambiguous.

Marina Markezic, a founding member of the European Crypto Initiative, a prominent advocacy group, expressed that adhering to the regulations proposed by the Parliament could be highly challenging, if not entirely unattainable, for a vast majority of smart contracts.

Thierry Breton, a top commission official overseeing digital affairs, has previously voiced his opposition to the Parliament’s rendition of the legislation. Breton argues that it obstructs the ability to define standards for smart contracts.

As the EU proceeds with the Data Act, blockchain community stakeholders will be closely monitoring the final language of the law and evaluating its potential repercussions on the innovation and implementation of smart contracts. All in all, the fate of smart contracts in the EU and potentially a huge segment of the crypto industry could depend on what the EU decides.


About Dren Hima

Being exposed to the crypto industry for the last few years has given me valuable experience with market analyses (technical and fundamental) as well as blockchain technology in general. As the content editor and a market analyst of Walletor, I strive to share the latest developments of the crypto industry, while also providing a unique educational experience for all Crypto & FinTech enthusiasts.