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Cryptocurrency legislation has been a debating issue around the world and many countries are keen to prepare the draft soon. The European Union has led among other regions and it continues to move ahead with the same pace. Recently the European Union parliament reportedly gave its resounding approval to the Data Act, a game-changing piece of legislation within the European Union (EU).
This introduced legislation highlights the concept of a “kill switch” for smart contracts. And it has cleared a significant hurdle with 481 votes in favor while only 31 votes were against it. Now, the legislation will still need approval. The European Council will approve the pending bill to become a law.
The inclusion of a “kill switch” in smart contracts acts as a controversial highlight. It marks a departure from the fundamental principles of blockchain technology. The legislation mandates that smart contracts must have the ability to be “interrupted and terminated,” providing controls for resetting or halting a contract. This essentially grants a central authority the power to intervene in the decentralized execution of a smart contract.
The move toward a smart contract kill switch in the EU has sparked debates within the blockchain community. Critics argue that such a feature contradicts the core tenets of decentralization and trustlessness that underpin blockchain technology. It introduces the prospect of centralized control, directly challenging the distributed nature of blockchain systems.
As the EU advances toward potentially implementing a smart contract kill switch, concerns loom regarding the enforceability and impact of such measures. Blockchain enthusiasts and proponents of decentralized technologies fear that regulatory interventions could stifle innovation and impede the widespread adoption of blockchain-based solutions.
EU’s MiCA Gathers Attention Among Others
The Data Act is a pivotal component of the EU’s comprehensive regulatory framework for digital technologies. Particularly noteworthy is the Markets in Crypto Assets regulation (MiCA), slated to come into effect in 2024. MiCA aims to establish thorough and tailored rules for the crypto sector within the EU, positioning the union as a global leader in providing a regulatory framework for digital assets.
MiCA builds upon existing EU rules for securities trading. It introduces measures to provide legal certainty for businesses operating in the crypto space and attract increased investment to the region. Nevertheless, compliance with MiCA might pose challenges for companies new to regulatory frameworks.
Under MiCA, any company looking to offer crypto services within the EU – including custody, trading, portfolio management, or advice – must secure authorization from one of the 27 national financial regulators.
Additionally, companies offering crypto assets to the public are required to publish a white paper that is transparent, fair, and explicitly warns potential buyers of associated risks.
While MiCA adapts existing rules to accommodate innovative instruments used for payments and investments, the introduction of a smart contract kill switch through the Data Act raises questions about the EU’s approach to balancing regulation and technological innovation.
As the legislation progresses, the crypto community will vigilantly observe its impact on the development and adoption of blockchain technologies within the European Union.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
