EU Data Act: Smart contracts must be capable of "secure termination," says EU Commissioner - a milestone in reshaping the digital realm

While the final version of the bill has not been released, the EU Commissioner stated that the Data Act has been finalized. Smart contracts are required to have rules for safe termination and temporary interruption. This seems to indicate that the characteristics of smart contracts such as immutability and permanent operation will no longer exist in Europe.

EU Legislation Regulates Smart Contracts

In mid-March this year, the European Parliament voted on the "Data Act," with 500 EU legislators in favor, 23 against, and 110 abstentions. However, negotiations between legislators and EU member state governments continued at that time to finalize the version of the legislation.

Due to the regulation of smart contracts in this act, including rules for Safe Termination and temporary interruption, it has sparked criticism from the crypto community.

However, on June 28, former French Finance Minister and current European Commissioner for the Internal Market Thierry Breton tweeted that the Data Act has been finalized, describing it as a "milestone in reshaping the digital realm."

Another deal! 👍👍
⁰Tonight’s agreement on the #DataAct is a milestone in reshaping the digital space.

Thanks to the swift work of the EP @delcastillop & the 🇸🇪 Council Presidency, we are on the way of a thriving 🇪🇺 data economy that is innovative & open — on our conditions. pic.twitter.com/vTWUU8xTx9

— Thierry Breton (@ThierryBreton) June 27, 2023

Smart Contracts No Longer "Immutable and Perpetual"

The legislation establishes rules for smart contracts to enable data sharing among parties, including regulations for Safe Termination, temporary interruption, as well as safeguards such as protection of trade secrets and prevention of illegal data transmission. This means that the inherent characteristics of smart contracts, such as being immutable and perpetual, will be challenged.

Although Commissioner Thierry Breton tweeted that the act has been finalized, the final version of the legislation has not been released. However, European Parliament member Damian Boeselager told CoinDesk that the legislation is stricter than the initial draft:

The legislation regarding smart contracts is stricter than the initial draft, aiming to give the public more rights over any generated data. With adjustments to the legislation, the scope is no longer limited to smart contracts but extends to the specific implementation of contracts in all data-sharing scenarios.

Previously, the European Blockchain Association and the IoT project IOTA jointly issued an open letter, suggesting to replace the term "smart contracts" with "digital contracts" and urging the EU that the Data Act is likely to conflict with the comprehensive regulatory framework for digital assets, MiCA.

However, CoinDesk cited an anonymous source indicating that the term "smart contracts" still appears in the final version of the legislation.