European Data Act: Decentralized Finance and smart contracts under threat?

Confusion between IoT and blockchain? – Yesterday, Tuesday March 14, 2023, the members of the Peuropean parliament in Strasbourg in order to adopt, or not, the DataAct containing, among other things, proposals relating to smart contracts. A overwhelming majority was finally in favor of the text. Result ? The application of article 30, which concerns the “essential prerequisites relating to smart contracts dedicated to data sharing”.

A Data Act theoretically dedicated… to the Internet of Things

The European digital data strategy was initiated by the Data Governance Actadopted on May 30, 2022 and aiming to improve the data sharing personal and non-personal, in particular through the establishment of intermediation structures.

After the establishment of a framework relating to the organization of data, the European Parliament then logically adopted the DataActin order to optimize the distribution of the value of these same data between the various economic actors concerned, and more particularly those related to the use of connected objects and the development of the Internet of Things.

>> 10% reduction on your trading fees? Sign up on Binance (commercial link) <<

An ambiguity regarding the scope of the text

Section 30 of the Data Act states that “smart contracts”, without further elaboration, should include rigorous access control mechanisms, as well as the ability to terminate or discontinue any transaction relating to such contracts.

Possibly adapted to the field of the Internet of Things, for which this text was initially designed, it is obvious that such a constraint is not possible in the field of Decentralized Finance (DeFi). Evidenced by the recent tweet from Curve, confirming the impossibility for such a protocol to comply with it.

After the recent hack 190 million dollars on the Euler Finance protocol and the rout of the American banking sector, the passage of Section 30 of the Data Act is part of the law of the series and disrupts the world of decentralized finance. This information must nevertheless be nuanced: the Data Act concerns data relating to connected objects, a very specific field of application and very far from DeFi. There is no doubt that Article 30 lacks precisionespecially since it is the only one dealing with smart contracts and the Data Act simply has no no connection with blockchain technologies as we know them.

Are you looking for a simple and efficient exchange? Join PrimeXBT Today the platform for trading cryptos, but also commodities and currencies (commercial link).