Controversial Smart Contract Kill Switch Rules Under Data Act Finalized by EU

Lawmakers in the European Union (EU) have reached a consensus on the European Data Act, a significant piece of legislation that has sparked debates and concerns within the crypto community. The agreement, announced by Thierry Breton, the EU’s Commissioner for Internal Markets, marks a milestone in the EU’s efforts to reshape the digital landscape.

Although the European Parliament had already passed the Data Act on March 14, the final version of the bill underwent negotiations among EU lawmakers. The primary focus of the act is to ensure the fair use and sharing of industrial data, eliminating barriers that hinder the free flow of data generated by various data-centric services like the Internet of Things.

While the act was initially intended to promote the utilization of data resources for training algorithms and lowering service costs, it faced significant criticism from the crypto community. The concerns mainly revolved around the provisions related to smart contracts and the lack of clarity in the proposed regulations.

One of the contentious aspects of the Data Act is the inclusion of measures that impose requirements on smart contracts, including the implementation of kill switches to facilitate safe termination. The act establishes rules for smart contracts involving parties sharing data, incorporating mechanisms for “safe termination and interruption.” It also includes safeguards to protect trade secrets and prevent unauthorized data transfers.

Critics within the crypto industry argue that the legislation may compel smart contract developers to design reset options, enabling the termination or interruption of transactions. This potential requirement could hamper innovation and impose compliance challenges for smart contracts in the crypto sector.

Martin Hiesboeck, head of research at Uphold, previously remarked that smart contracts are on the verge of falling under EU-wide regulation as part of a broader strategy focusing on data markets.

When contacted for comment regarding the smart contract controversy, Cointelegraph reached out to Commissioner Breton but did not receive a response as of the time of publication.

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