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March 15, 2023

Euro Parliament approves Data Act that requires kill switches on smart contracts


The European Parliament passed the Data Act on March 14. The comprehensive bill was intended to “boost innovation by removing barriers obstructing access to industrial data.” Among its provisions is an article that would require smart contracts to be alterable. 

The legislation established rules for fairly sharing data generated by “connected products or related services,” such as the Internet of Things and “industrial machines.” Eighty percent of industrial data generated is never used, the European Parliament noted in a statement, and this act would encourage greater use of those resources to train algorithms and lower prices for device repairs.

The act contains provisions to protect trade secrets and avoid unlawful data transfers, and it set requirements for the smart contracts of parties offering sharable data, including “safe termination and interruption”:

The act also granted smart contracts equal protection when compared with other forms of contract.

Experts identified a number of issues with the legislation. OpenZeppelin head of solutions architecture Michael Lewellen commented in a statement provided to Cointelegraph:

Professor Thibault Schrepel of the Vrije Universiteit Amsterdam said in a tweet that the act “endangers smart contracts to an extent that no one can predict,” and pointed out sources of legal uncertainty in the act. In particular, he found that it did not specify who could stop or interrupt a smart contract.

The bill was passed by a margin of 500-23, with 110 abstentions. Parliament members will now negotiate the final form of the law with the European Council and individual member countries of the European Union.

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