EU legislators have given the green light for the disputed European Data Act, initially introduced in early 2022 and ratified by the European Parliament on March 14. This move has been met with mixed reviews, particularly from crypto enthusiasts. The endorsement was affirmed via a tweet by Thierry Breton, the EU Commissioner for Internal Markets, who hailed it as a significant step towards digitization.

Decoding the Act’s Objectives and Controversy

The European Data Act’s approval by the Parliament in March was just the beginning. Since then, intense discussions regarding the act’s final form have been underway among EU law creators. The act’s primary objective is to ensure equitable use of industrial data and eliminate obstacles to the fair distribution of data generated by various data-centric services, such as the Internet of Things.

Parliamentarians in Europe have asserted that this act would facilitate broader utilization of data assets to hone algorithms, subsequently driving down service costs. However, it’s the act’s provisions around smart contracts and its ambiguity that have stirred up controversy within the crypto community.

Impact on Smart Contracts: A Mixed Bag

The act mandates specific alteration requirements for smart contracts, which includes ‘kill switches’ allowing for their safe termination. It lays out regulations for smart contracts for parties offering shareable data, encompassing provisions for “safe termination and interruption” while incorporating protective measures to guard trade secrets and thwart unauthorized data transfers.

Critics within the crypto world argue that this new EU legislation could compel smart contract creators to engineer mechanisms to enable transaction termination or interruption. They worry this could hamper innovation and pose compliance challenges for smart contracts within the crypto sector.

As Martin Hiesboeck, Uphold’s Head of Research, previously pointed out, smart contracts are edging towards falling under EU-wide regulation as part of a more comprehensive strategy on data markets.

When approached for a statement regarding the smart contract controversy, Breton did not respond prior to publication. The impact of this new regulation on the burgeoning field of crypto and smart contracts remains to be seen as the industry grapples with navigating this new legal landscape.