Smart Contracts in Peril? EU’s Data Act Vote Stirs Controversy in the Web3 World

New data controls may require smart contracts to include kill switches, sparking debate among experts and the Web3 community.

According to a report by CoinDesk, in a recent development, the European Parliament has given the green light to new data regulations that could potentially necessitate the incorporation of kill switches in smart contracts to halt or reset activity. The 2022 EU bill, known as the Data Act, aims to provide individuals with greater authority over data produced by smart devices. However, the legislation has drawn criticism from the Web3 community. This past Tuesday (March 14), the European Parliament voted on the Data Act, with 500 members in favor, 23 opposed, and 110 abstaining.

During the discussion, Pilar del Castillo Vera, the leading legislator on the bill, emphasized that the updated regulations will benefit both consumers and businesses by granting them control over the usage of data generated by connected devices. Yet, the proposed provisions in the bill have alarmed many within the Web3 ecosystem.

The redrafted bill by del Castillo Vera stipulates that smart contracts must be equipped with access controls and safeguards for trade secrets. Moreover, they would need to possess features allowing termination or resetting. Experts are concerned that such measures might compromise the core function of smart contracts.

The proposed legislation has faced opposition as well. Thibault Schrepel, a blockchain law specialist and associate professor at VU Amsterdam University, expressed his reservations in a tweet before the vote. Schrepel argued that the current draft of Article 30 goes to extremes in addressing the challenges posed by immutability, thereby putting smart contracts at risk in an unpredictable manner.

Schrepel also noted that the legal language in the bill is ambiguous concerning who would be responsible for activating a kill switch on a smart contract. He believes this creates a conflict with the fundamental concept that automated programs should be unalterable by any party.

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