European Council and Parliament Reach Consensus on Data Act, Raises Concerns for Smart Contracts and Crypto Community
Summary:
The European Council and Parliament have reached a political consensus on the Data Act, a legislation on non-personal data. The Act aims to clarify data usage and create rules for accessing data across all sectors of the economy. However, concerns have been raised regarding its impact on smart contracts and the lack of clarity surrounding the "kill switch" provision. The crypto community is urging regulators to reconsider and provide more clarity on certain aspects of the Act.
The European Council and Parliament have reached a political consensus on the Data Act, a significant step towards finalizing legislation on non-personal data. Thierry Breton, the European Union commissioner for the internal market, hailed the agreement as a milestone in reshaping the digital space. The Data Act, which complements the Data Governance Act, aims to clarify who can benefit from data and under what conditions. The Act is part of the EU's broader strategy to establish itself as a leader in the data-driven economy. It proposes new rules for accessing and utilizing data generated in the EU across all economic sectors. However, the crypto sector faces a challenge as the Data Act could impact the use of smart contracts in the European Economic Area. One concern raised is the provision for a "kill switch" in automated data-sharing agreements, which could lead to unintended consequences for existing smart contracts on public blockchains. The Act also lacks clarity on the conditions for activating the kill switch, raising uncertainty in the blockchain community. Furthermore, it fails to define the scope of a "data sharing agreement," leaving it ambiguous whether existing smart contracts in Web3 applications comply. The blockchain industry is calling for clearer regulations and considerations for decentralized finance (DeFi) platforms. Errors in kill switch implementations and the rigid nature of smart contracts could result in asset lock-ups, protocol shutdowns, and loss of funds. Vendors and deployers of smart contracts may need to adapt their contracts to comply with the Data Act's rules on data sharing. However, it is crucial to determine who precisely needs to follow these rules. The crypto community has proposed alternative solutions to provide legal clarity to smart contracts. Concerns have been raised that the Data Act and the recently agreed MiCA regulation may clash, and the regulation of decentralized finance remains a complex issue. The completion of the trialogue on the Data Act marks the finalization of the text, potentially impacting the European crypto industry and businesses operating in the EU. The lack of clarity regarding the specific use cases covered by the new rules creates uncertainty within the industry. The next step for the community is to collaborate with European standardization groups to establish standards for smart contracts that align with Article 30 of the Data Act. The extension of the Act to public networks could result in companies leaving the EU and stifled innovation in the blockchain industry, highlighting the importance of finding a balanced regulatory approach.
Published At
8/23/2023 1:03:00 PM
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