The European Parliament has taken a step towards regulating smart contracts under EU-wide legislation, as part of a broader strategy on data markets. The legislation, adopted on Tuesday under the Data Act, is focused on data from connected devices and the Internet of Things, but its provisions on smart contracts could have far-reaching effects on the crypto industry.
As automated executions written into software underpin the infrastructure of DeFi, some industry insiders are concerned that the scope of the Data Act is not clearly defined. The legislation will require rigorous access control mechanisms and protections for trade secrets integrated into the design of smart contracts. It will also provide the same level of protection and legal certainty as other contracts generated through different means.
Smart contract developers will need to ensure compliance with the regulation, including issuing an EU declaration of conformity. The legislation will now go into trilogue negotiations between EU institutions.