European New Data Act Requiring Alterable Smart Contracts with "Kill Switches"

The European Parliament has approved the Data Act, a comprehensive bill designed to promote innovation by removing barriers to access industrial data. However, the act's provisions on smart contracts have caused concern among members of the crypto community.

One of the articles requires smart contracts to be alterable and includes a "kill switch" function that allows for the safe termination or interruption of the contract.

“The smart contract shall include internal functions which can reset or instruct the contract to stop or interrupt the operation. […] Especially, it should be assessed under which conditions non-consensual termination or interruption should be permissible.”

This has alarmed experts who argue that including such a function undermines the immutability of smart contracts and introduces a point of failure, since someone needs to govern the use of the kill switch.

The act is aimed at encouraging greater use of resources generated by connected products or related services, such as the Internet of Things and industrial machines. It also sets out requirements for smart contracts, including provisions to protect trade secrets and avoid unlawful data transfers. However, the lack of clarity in the act over who can stop or interrupt a smart contract has been highlighted as a potential source of legal uncertainty. The act grants smart contracts equal protection to other forms of contract.

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