The European DeFi industry is reportedly lobbying against a potential Data Act law that could threaten smart contracts and disrupt the broader blockchain sector. Negotiations for the law are set to conclude in June, but advocates are concerned that the legal texts do not clarify the scope of the article regulating smart contracts.
The European Crypto Initiative (ECI) and other advocates have called on policymakers to consider the potential danger of spillover effects on blockchain developers, which could harm DeFi in member countries. The ECI urges regulators to avoid stifling innovation and technological development inadvertently.
Marina Markezic, executive director of the European Crypto Initiative, expressed concerns about the worst-case scenario:
"The worst-case scenario is whether we would even be able to use public blockchains for using smart contracts while complying with the Data Act requirements."
Although a source close to the negotiations stated that European institutions aim to promote smart contracts through the Data Act and do not intend to regulate them, Article 30 of the law is a significant concern for the DeFi industry. This article would require smart contracts to be designed to allow termination or interruption, which goes against the nature of blockchain technology.
A European Commission spokesperson, however, clarified that the controversial article is neutral to technology:
"It sets high-level requirements for smart contracts, whether or not they are based on blockchain technology or a more traditional database."
The three European institutions leading the negotiations have established their stance on the Data Act, and negotiations will proceed during upcoming trialogue meetings this month and next.
