Debate Continues as EU’s Data Act Final Draft Includes Smart Contract Kill Switch

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The final version of the European Union Data Act has been revealed, raising concerns within the blockchain industry. The new rules, as seen by CoinDesk, do not address the industry’s pleas and could potentially render most smart contracts illegal. The provisions aimed at ensuring the secure termination of automated data-sharing agreements still refer broadly to “smart contracts” and do not limit the scope to privately owned and permission data records as hoped by lobbyists.

Negotiators reached an agreement on the controversial text on June 28, following concerns expressed by blockchain organizations in an open letter. However, the text has only been made public now. The disclosed version of the law still refers to “smart contracts” instead of the industry’s preferred term, “digital contracts.”

Additionally, it places responsibilities on “vendors” of the automated programs, raising fears among lobbyists regarding the potential imposition of perpetual and limitless liabilities in decentralized scenarios where there is no single seller.

Although the text has been modified to apply only to the “automated execution” of data-sharing agreements for smart devices like connected cars and fridges, it fails to specify private or permissioned networks, extending its scope beyond what the lobbyists had requested.

The circulated text, shared privately with member governments by Spain, the current chair of the talks, reflects the law’s updates based on the provisional political agreement reached during a June 27 meeting. The text states that all political issues were resolved, closing the negotiations with lawmakers at the European Parliament. 

For the text to become law, it must receive formal approval from the parliament and the Council of the EU, which consists of the governments of the member states.