European Union published the new Data Act. This law proposes to regulate data generation and processing by actors who use it. This act has a large impact on smart contracts. The Act proposes that smart contracts have a termination function so transactions can be stopped when needed.
EU Data Act Could Stifle Smart Contracts
On February 23, the EU Data Act was published. It aims to control and regulate data generation, providing legal certainty to Europe’s data market. According to a press release, the new Data act seeks to “ensure fairness in the digital environment, stimulate a competitive data market, open opportunities for data-driven innovation and make data more accessible for all.”
The new act has an extensive scope and touches on the topic of smart contract software, which is designed to perform certain tasks with data inputs. The document, in its article 30, titled “essential requirements regarding smart contracts for data sharing,” defines the requirements that smart contracts must fulfill to be deployed in conformity with EU laws.
One of these requirements, called “safe termination and interruption,” states that approved smart contracts shall:
…include internal functions which can reset or instruct the contract to stop or interrupt the operation to avoid future (accidental) executions.
The EU also requires smart contracts be validated. This includes auditing contracts and the possibility to obtain a record of transactions that were made by software in the past.
Only Limited Application
Some analysts were not happy with the proposals for smart contracts that could be interrupted and to standardize smart contracts according to new Data Act requirements. They also criticized both the document’s scope and applicability. Thibault Schepel, Associate Professor in Law at VU Amsterdam is an example of this. stated:
It is huge/controversial. Smart contracts, which make data accessible, are deemed to be irrevocable. So… basically, all oracles *shall* be redesigned (but how?Or else, they’ll be in violation of the law.
Schrepel even further statedThis act, if approved by the legislature would render millions of smart contracts online illegal in the jurisdiction where they are proposed. There is no way to adapt them to meet the requirements of the document.
Recent reports indicate that the EU is focusing on crypto currencies, with several of its member states lobbying to create a watchdog for AML in this area.
How do you feel about the Data Act? What are your thoughts on smart contract requirements and what does it mean for data protection? Leave a comment below.
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