EU Parliament’s Smart Contract Plans Limit Standard-Setting Promise, EU Commissioner Says

Controversial European Union rules requiring a kill switch for certain smart contracts may limit the vital ability to set standards for the sector, the European Commission’s Thierry Breton told reporters on Tuesday.

His comments imply that provisions voted on by lawmakers earlier that day no longer meet the objectives set out in a 2022 Commission legal proposal known as the Data Act.

“We need to harmonize basic requirements for these smart contracts” to ensure interoperability, legal certainty and large scale deployment, said Breton, the commission’s lead official responsible for internal market laws, including for the digital sector. “When we made this proposal we intended to mandate standardization organizations to develop these.”

“I’m aware that the Parliament proposed changes to these basic requirements,” he said. “Notably these changes may limit the possibility to develop harmonized standards for smart contracts.”

Breton is now set to mediate between lawmakers and national governments to hammer out a final law, which aims to set out exactly how the makers of smart devices like cars or fridges can use the information they gather.

The Parliament's plans mean anyone offering a smart contract as part of a data sharing agreement to ensure it can be terminated or reset if something goes wrong. Arguably, that negates the purpose of a smart contract, intended to be unalterable and immune from central control – but Breton said he still wanted to see them succeed.

“Smart contracts are a useful tool to enable data sharing,” Breton said. “They can provide both data holders and data recipients with guarantees that data sharing conditions are fully respected.”

Read more: EU Parliament Passes Bill Requiring Smart Contracts to Include Kill Switch