EU Parliament votes in favor of Data Act with clause impacting smart contracts


  • The EU Parliament has passed the Data Act with a clause that could potentially render many existing smart contracts illegal, requiring automated data-sharing agreements to have a safe termination option.
  • The Data Act aims to boost innovation and AI development, allow public sector access to private data in emergencies, and protect against unlawful data transfers while facilitating user transition between cloud services without ‘lock-in.’
  • The act embodies the recommendations of the Conference on the Future of Europe, promoting a robust digital economy, the digital transformation of public services, and a common European digital identity safeguarded by European standards.

The EU Parliament has given its nod to the landmark Data Act, positioning the EU at the forefront of digital innovation. With 481 votes to 31, the act is poised to revolutionize how data is shared across the bloc, according to a press release. At the heart of the debate is a stipulation with far-reaching implications for smart contracts. This provision mandates that all automated data-sharing agreements have a safe termination mechanism. This change could deem many existing smart contracts, which automatically execute transactions under specific conditions, unlawful.

Smart contracts are intrinsic to blockchain networks such as Stellar, Polygon, NEAR, and Cardano. This development has raised concerns among organizations reliant on these contracts. They fear that the broad classification of smart contracts in the July 7 text will disrupt their operations. Their apprehensions were laid out in an open letter, highlighting the critical role these contracts play in their ecosystems.

Fostering innovation and protecting data

The Data Act aims to eliminate data access barriers, fostering innovation and facilitating the development of new services. It underscores the EU’s commitment to creating an environment conducive to advancements in fields like artificial intelligence, which demands large datasets for algorithm training. Moreover, the legislation is designed to reduce the costs of after-sales and repair services for connected devices.

A pivotal aspect of the new law is its emergency provisions. In cases like floods or wildfires, it allows public sector entities to access and use private sector data. Additionally, MEPs have defined trade secrets explicitly to prevent unlawful data transfers and leaks to countries with lax data protection standards.

Another significant achievement of the Data Act is the empowerment it grants users in their dealings with cloud service providers. It introduces measures to prevent ‘lock-in’ scenarios with providers, enabling a smoother transition between different services and enhancing safeguards against illegal data transfers.

Pilar del Castillo Vera, the Lead MEP from EPP, ES, hailed the Data Act as a “game-changer.” According to her, access to operational data will allow entities across various sectors to refine their processes and supply chain management. This act is expected to lay the groundwork for a new data-agile system, which will give rise to innovative business models and processes, driving competitiveness.

The passage of the act is not the end of the legislative journey; it now awaits formal approval by the Council. Once enacted, the Data Act will leverage the unused 80% of industrial data, according to the European Commission, ensuring that users can access their generated data.

The Data Act is a tangible realization of the Conference on the Future of Europe’s vision. It aligns with the proposals aimed at building a robust digital economy that is fair and equitable. By supporting the digital transformation of public services and the adoption of a European common digital identity, the act promises streamlined cross-border digital transactions and services, all underpinned by comprehensive European standards and guidelines.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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