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Blockchain devs expect complications from EU smart contract kill switch

Blockchain devs expect complications from EU smart contract kill switch


The European Parliament has approved the Data Act, a piece of legislation that includes a requirement for smart contracts to have a “kill switch.” The legislation was passed with 481 votes in favor and 31 against and still needs approval from the European Council to become law.

The Data Act states that smart contracts must be capable of being “interrupted and terminated,” conflicting with the foundational ethos of blockchain decentralization. The implementation and impact of such kill switches remain unclear. Attorneys Scott McKinney and Laura De Boel believe that the requirements will only apply to a small subset of smart contracts governed by the Data Act.

Gracy Chen and Pavel Matveev also expressed concerns about the EU’s implementation of a kill switch, emphasizing the centralized element it introduces and the potential impact on smart contract development and trust.

Regulation around smart contracts in the EU may hinder blockchain innovation, forcing many companies to avoid using smart contracts in their applications. However, the Data Act also allows European standardization organizations to draft harmonized standards for smart contracts, which could lead to greater adoption.

Arina Dudko sees the necessity for regulatory oversight as similar to the development of safety and standards for automobiles. She believes that such regulations are critical for ensuring the safety and functionality of resources and products shared in the crypto market.

The impact of the Data Act on the industry is still under debate, with some suggesting that it may lead to a retreat or hinder adoption. However, the visible set of rules provided by the EU’s regulatory landscape could address challenges faced by businesses employing smart contracts.

The United States is taking a different approach, as it does not have a federal smart contracts law and has few state laws regarding smart contracts. This contrasts with the cautious and regulation-focused approach of the EU.

As the Data Act moves closer to becoming law, it remains to be seen how the blockchain industry will adapt and respond to its requirements. The true scope of the law and its impact will only become clear once it has come into effect.