What does the EU Data Act say about smart contracts?

“The party offering smart contracts in the context of an agreement to make data available shall comply with the following essential requirements:

(a) robustness and access control: ensure that the smart contract has been designed to offer rigorous access control mechanisms and a very high degree of robustness to avoid functional errors and to withstand manipulation by third parties;

(b) safe termination and interruption: ensure that a mechanism exists to terminate the continued execution of transactions: the smart contract shall include internal functions which can reset or instruct the contract to stop or interrupt the operation to avoid future (accidental) executions; in this regard, the conditions under which a smart contract could be reset or instructed to stop or interrupted, should be clearly and transparently defined. Especially, it should be assessed under which conditions non-consensual termination or interruption should be permissible

(ba) equivalence;: a smart contract shall afford the same level of protection and legal certainty as any other contracts generated through different means.

(bb) protection of confidentiality of trade secrets: ensure that a smart contract has been designed to ensure the confidentiality of trade secrets, in accordance with this
Regulation.“

While these provisions are ostensibly intended to promote security, reliability, and legal certainty for smart contracts in this particular context, they may also have unintended consequences and present challenges for developers and users of smart contracts.

Article 30(b) which requires there to be a mechanism for the termination or interruption of the smart contract (essentially what many in the industry are calling a “kill switch”) seems to be the most controversial clause. Many in the blockchain industry have noted that this requirement would undermine immutability, which is an essential element of smart contracts.

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Thibault Schrepel, Professor at VU Amsterdam, also pointed out that it’s not clear who can actually terminate the smart contract. He notes that the legislation should make it clear that only the creator can terminate the smart contract.

Is the Data Act law?

Approval by the Parliament doesn’t necessarily mean the Data Act in its current form will become law. It will now move on to the next stage of the EU’s legislative process – known as the trilogues – where the Council and Commission will debate its contents.