Key Points
- The EU Commission has brushed off concerns from the crypto industry regarding the new Data Act.
- The Data Act requires all smart contracts to include a “kill switch” which has raised concerns in the Web3 community.
- The EU has stated that the new data rules won’t make smart contracts illegal.
The European Commission has responded to the crypto industry’s concerns over the newly proposed Data Act. The proposed act mandates the inclusion of a “kill switch” in all smart contracts, prompting fears among the Web3 community that this could limit the decentralization of smart contracts by giving a select group of individuals or one person the power to shut down operations.
Despite this concern, the European Commission maintains that the new EU data regulations do not criminalize smart contracts and dismisses the industry’s apprehension as unwarranted. As the industry continues to evolve, the stakes are increasing, and industry players are keeping a watchful eye on future developments.
#EUCI, with other 5 organisations and 55 signatories, has written an open letter addressing concerns regarding the #DataAct.
We call on lawmakers to reconsider and clarify certain aspects of it, to ensure neutrality and legal certainty in the #blockchain industry. pic.twitter.com/DUCb0uymQH
— European Crypto Initiative (@EuCInitiative) June 16, 2023
EU taking the Crypto Route
The European Union has been at the forefront of digital regulation, and their data privacy, technology, and cryptocurrency frameworks are no exception. These frameworks have been both transparent and forward-looking, offering a glimpse into the future of digital regulation. One new development that has caught the attention of many is the “kill switch clause.”, in the new Data Act provision.
While the full extent of this provision remains to be seen, with time, it will become clearer. The EU has already taken significant steps to regulate the cryptocurrency industry, with the Markets in Crypto Assets (MiCA) regulation signed into law in May 2023. This law provides licenses for crypto exchanges and wallet providers to operate across the 27-nation bloc while requiring stablecoin issuers to hold appropriate reserves.
Worries around the Data Act
The new Data Act provision is intended to cover software that automates the execution of contracts in the context of data sharing. While it does not solely cover the Internet of Things, some crypto enthusiasts in the industry still remain concerned. They fear the law could end up affecting the smart contracts.
Despite this, a spokesperson for the commission, who proposed the bill in 2022, reassures that there is no need for worry. They state that there is no reason to fear that existing smart contracts would become illegal once the Data Act comes into effect. The spokesperson also adds that the requirements for smart contract software vendors are quite high-level and, therefore, should not pose any issues.
According to Chris Donovan, general counsel at the NEAR Foundation, the current drafting of the proposed regulations within the EU is quite broad, which could inevitably lead to confusion regarding its intended scope.
This news has undoubtedly captured the attention of the crypto industry, as there are concerns that these regulations may hinder innovation. However, the EU has made it clear that they are striving for a balance between protecting consumers and ensuring financial stability while also promoting innovation. Despite these concerns, the EU should be commended for their progressive and transparent approach to regulatory frameworks, and the industry will need to adapt accordingly to the evolving landscape.
