European Commission calls for kill button for smart contracts

Key facts:
  • The law would seek to obtain data held by the private sector that states deem “necessary.”

  • Blockchain specialist Thibault Schrepel says that oracles would be the most affected.

The legislators of the European Union unveiled another controversial bill to regulate the activity of the cryptocurrency sector. This time it is the so-called Data Law, developed by the European Commission, which includes provisions that threaten data privacy and the immutability of smart contracts.

The project, dated February 23, 2022, contains an article with specific requirements on data exchange in smart contracts. Regulations oblige smart contract developers to include in the code a kind of off button that allows to “terminate the continuous execution of transactions”. It also asks to include a mechanism that tells the smart contract to “reset,” stop, or interrupt “to prevent future (accidental) executions,” the document says.

According to the CriptoNoticias Criptopedia, smart contracts are applications or computer programs created to carry out one or more specific tasks by fulfilling a series of pre-established conditions or instructions. Its main benefit is that its fulfillment is not subject to the interpretation of the parties or the approval of an arbitrator, since they are executed automatically when the conditions written in the code are met.


Smart contracts are the basis of the operation of multiple decentralized ecosystems that have been developing in Ethereum and other blockchain networks. Some of them like DeFi (decentralized finance), DAO (decentralized autonomous organizations), the games play-to-earn (play to win), metaverses, among others, have managed to capture a significant volume of capitalization.

If the new regulations are approved, the providers of said services would be obliged to adapt their applications to this regulation. As a consequence, both the projects and the States themselves could stop the automatic execution of smart contracts under circumstances that they discretionally consider “risky” for users.

Transaction data must be available

The European Commission’s proposal also requires programming a system that allows the “auditability” of data within smart contracts. For this purpose, a record of the history of operations carried out would be kept, as well as the data of each transaction, “the logic of the smart contract and the code”, specifies the document.

In another point it is indicated that the contracts must include “rigorous access control mechanisms in the governance layers”.

Some comments suggest that the provisions proposed by the European Commission derive from the recent multi-million dollar attacks on DeFi projects, product of exploited vulnerabilities in their smart contracts. As CriptoNoticias reported, recently Wormhole, the Solana Defi bridge, suffered the second largest hack in history, which was in the order of USD 318 million.

The European Commission pointed out on the Data Law that it is necessary to respond quickly and safely in “exceptional circumstances”. Source: Wikimedia Commons.

new controversy

The full availability of data and the possibility of stoppable smart contracts caught the attention of experts such as Thibault Schrepel, a PH.D professor of law at the University of Amsterdam, specializing in blockchain networks.

Schrepel published a Tweet where he warns on the “great and controversial” of the provisions included in regulations proposed by the European Commission. “So…basically, all oracles *will* be redesigned (but how?) or else they’ll be breaking the law,” the specialist noted in his post.

“To be clear: the data law (if confirmed as such) bans millions of smart contracts, which cannot be redesigned. Good luck everyone!” Schrepel concluded in another tweet.

is controversy joins the one that was unleashed last week, when the European Parliament amended the proposed law for the regulation of cryptocurrency trading, known as the MiCA Law, to add the prohibition of trading cryptocurrencies that use Proof-of-Work consensus. As CriptoNoticias reported, the vote on the bill had to be suspended by the deputy rapporteur, due to pressure from various members of the cryptocurrency ecosystem in Europe.

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