European Union finalizes Data Act despite protests

EU legislators have finalized the Data Act despite protests from the blockchain industry about smart contract kill-switch.



  • The EU blockchain community has raised concerns that the Act’s provisions on smart contracts could kill the industry.
  • A recent open letter signed by these organizations stated that the Act could clash with the MiCA regulation.

Legislators from the European Union (EU) have finalized new rules known as the Data Act. Thierry Breton, the European Commissioner for Internal Market, confirmed the deal on Twitter on 28 June.

The Act was a part of a larger revamp of data regulations regarding internet-connected devices in Europe.

“Tonight’s agreement on the #DataAct is a milestone in reshaping the digital space,” Breton said.

The decision has been taken despite protests from the EU blockchain industry.

The blockchain community has raised concerns that the provisions of the Act on smart contracts could kill the industry. Critics argue that the Act’s vague scope could have a potentially adverse effect on decentralized transactions governed by immutable code.

A recent open letter signed by organizations associated with a number of blockchains, such as Stellar, Polygon, NEAR, and Cardano, stated that the Act could clash with the recently agreed Markets in Crypto Assets (MiCA) regulation. MiCA will go into force in 2024.

The regulation grants crypto exchanges and wallet service providers permission to operate across the EU, but legislators purposefully avoided discussing the more challenging issue of how to govern decentralized finance (DeFi). The Commission therefore will have to return to in a few years’ time.

There was still some uncertainty over whether the latest version of the Act still refers to “smart contracts” rather than alternative formulations suggested by the industry such as “digital contracts.”

EU blockchain industry’s concerns not allayed

The Commission has dismissed concerns the blockchain industry raised, claiming that the new rule will not eliminate current smart contracts. The “high-level standards” it contains will not be difficult for vendors to implement in practice.

However, it is unclear if the final agreement would allay fears of the EU blockchain industry. There are concerns that the measures will be ineffective for public, permissionless blockchains, where there is no central authority to enforce regulatory constraints.

The European Parliament and Council, which represent the bloc’s 27 member states, must vote in favor of the Act agreed upon by legislators so that it is passed into law.