Polygon Labs demands amendments to European ‘data law’

Submitted an open letter to the EU parliament, etc.

Polygon Labs, which promotes the development and dissemination of the crypto asset (virtual currency) Polygon (MATIC) network, submitted an open letter of objection to the EU Parliament, the EU Council, and the EU Commission on the 18th. We are calling for appropriate amendments and clarification of regulations regarding Article 30 of the Data Law, which has the risk of unintended regulation of smart contracts.

1/ Today @0x Polygon Labs published an open letter to the EU on Art. #DataActwhich could have serious consequences for permissionless smart contracts. @Ledger has joined in proposing amendments to narrow Art. 30 to protect decentralized software development. Read pic.twitter.com/AZHGCm14sQ

— Rebecca Rettig (@RebeccaRettig1) April 17, 2023

Article 30 is applied in the form of stating that it should be clarified that the sharing of “personal data” as defined by the Data Act should be limited to permission-type smart contracts that companies enter into. .

Many cryptocurrency blockchains have a permissionless mechanism that allows them to participate as nodes that verify and approve transactions on the network without administrator permission.

Polygon Labs is also developing a variety of permissionless blockchains, on which third-party participants are deploying smart contract applications.

Polygon proposes amending these open, transparent, and permissionless contracts so that Section 30 does not unintentionally make them “regulatory.”

background

As background, the European (EU) Council agreed to a bill based on the Data Act in March this year. It sets out rules for fair access and use of data, but fears have been raised that it could affect smart contracts if the scope is not clearly defined.

This bill has not yet been enacted. The final content will now be discussed between the European Parliament and the European Council, mediated by the European Commission.

connection: European Council agrees bill that could restrict smart contracts

Issues and fixes

Polygon Labs first took issue with the fact that Article 30 of the Data Act presupposes “a party that provides a smart contract.” Decentralized apps (dApps) have developers who write their code, but after they are deployed on the blockchain, they run autonomously and transact with users.

It is a form that describes the difference from the system operated, managed and provided by companies. For this reason, he argues, the wording needs to be revised so that software developers who write code are not considered “providing parties” for smart contracts.

He added that this is inconsistent with the EU’s comprehensive cryptocurrency bill, MiCA. It is like pointing out that MiCA excludes “virtual currency services provided in a fully decentralized manner” from its scope.

On the other hand, even if it is labeled as “decentralized” or “dApp”, if it has a centralized system or is controlled by a party such as a “natural person or company”, it will be subject to Article 30. It is said that it recognizes that it can correspond to.

Another problem is that the current definition of “data” in Article 30 of the Data Act is too broad, and all information exchanged between individuals through smart contracts is supplemented.

Polygon Labs proposes narrowing the data referred to in Section 30 to “personal information” and “confidential business information and trade secrets.”

In light of the above, I am of the opinion that Article 30 should clarify the scope of “party” as follows.