Europe’s Crypto Kill Switch Has Arrived

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Europe’s Data Act in January 2024 went into force, and the legislation has far-reaching requirements that could force smart contract developers to comply with strict requirements – such as terminating a live smart contract – even in cases where the smart contract features immutability, thus making any changes impossible.

“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,” reads Article 30 of the Data Act.

In essence, the Data Act outlaws immutable smart contracts, and thus true blockchain applications, potentially marking the dawn of a dark day for the European crypto industry after much optimism around MiCA (Markets in Crypto-assets) legislation passed last year.

The draconian rules in the Data Act are likely to cause an exodus of crypto talent away from the continent if lawmakers don’t see the errors in their ways – and quickly.

The Data Act’s demand for a mechanism to safely terminate or interrupt smart contracts represents a kill switch for blockchain-based apps.

It goes entirely against the nature of blockchain’s innovation.

Smart contracts are designed to avoid interference and potential termination dictated by authorities. That is the entire point of not having a middleman, after all.

Such a kill switch is also a single point of failure and threatens to create additional exploit risks, potentially putting user funds at serious risk.

It’s a disaster of a bill for crypto.

Although the Data Act is officially designed to remove barriers to data access, it creates barriers to access in the context of blockchain – talk about unintended consequences.

That’s right – the Data Act achieves the opposite of what it set out to do.

Aside from the fact that the Data Act renders smart contracts unlawful, the Act also fails to clearly define smart contracts and those instances when authorities could demand a smart contract be terminated.

It’s a whole lot of uncertainty that should make the European blockchain industry very, very nervous. It’s on the crypto industry to clean this mess up.

Undermining blockchain’s immutability is nothing more than innovation killing. Immutability is how blockchain ensures the integrity of data passing through the…