The European Parliament passed the Data Act on March 14. The comprehensive bill is intended to “boost innovation by removing barriers that impede access to industry data.” Among these provisions is an article requiring smart contracts to be modified.
The law establishes rules for the fair sharing of data created 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 Europarliament said in a statement, and this action will encourage the use of these resources to train algorithms and lower prices for repairing devices.
The law contains provisions to protect trade secrets and avoid unauthorized data transfers and sets requirements for smart contracts of parties offering sharable data, including “safe termination and interruption”:
“Smart contracts must include internal functions that can reset or instruct the contract to stop or interrupt operations; […] In particular, it should be assessed in situations where it is not allowed to stop or inadvertent interruption.
The law also gives smart contracts the same protection as other types of contracts.
Experts identified several problems with the law. OpenZeppelin’s head of solution architecture Michael Lewellen commented in a statement provided to Cointelegraph:
“Including a kill switch breaks the guarantee of immutability and introduces a point of failure because someone has to manage the use of that kill switch. […] Many smart contracts such as Uniswap do not have this kill switch capability.
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Prof. Thibault Schrepel from the Vrije Universiteit Amsterdam said in a tweet that the action, “endangers smart contracts to an extent that no one can predict,” and pointed out the source of legal uncertainty in action. In particular, they found that it does not specify who can terminate or interfere with the smart contract.
Today, the @Europarl_EN they are debating the Data Act (https://t.co/cwDOFDGmU9). My thoughts on the latest version of Article 30 (#smart contract).
➝ Immutability of smart contracts is the key to its survival (ie, immutability is the main differentiator https://t.co/X3XfgRC6ZL… https://t.co/4JHg2fP84j pic.twitter.com/8QTSBxSueH— Thibault Schrepel (@ProfSchrepel) March 14, 2023
The bill passed by a margin of 500-23, with 110 abstentions. MEPs will now negotiate the final form of the law with the Council of Europe and individual member states of the European Union.