Polygon Labs and Ledger are urging EU lawmakers to amend certain clauses of the Data Law related to smart contract rules.
The companies wrote in a joint open letter that the current version of Article 30 of the Data Law “will inhibit innovation and economic growth” in the European crypto industry, as it does not take into account the complexities of smart contract systems that do not they have permission.
They added that the Data Law is intended to “bridge the digital divide” to allow everyone to participate in these emerging systems; however, the current state of Article 30 will likely have the opposite effect and limit equal participation in these systems.
“We respectfully request that you consider the proposed revisions to art. 30 discussed below to ensure that this new law does not inadvertently capture open, transparent, and permissionless parts of emerging blockchain technology.”
According to the letter, certain clauses of article 30 must be changed since the lack of clarity and specificity in the language extends its scope beyond what is necessary.
He added that this could lead to an unintended and unintended effect of banning permissionless standalone smart contracts and apps that will no doubt fall under this umbrella.
The main issue raised in the letter is the preamble to Article 30, which stipulates that the requirements within will be imposed on “the party offering smart contracts in the context of an agreement to make the data available.”
However, the letter argues that a significant part of smart contract systems do not have such a part, since they are autonomous and will not be able to comply with the mandate of the Data Law.
No offering party
The companies urged lawmakers to revise the clause to ensure it can only be applied to “authorized” smart contract-based systems that have an “identifiable natural person or corporate entity” owning and operating them.
They also asked lawmakers to exclude software developers working on decentralized protocols and applications from the term “party offering smart contracts.”
“Given the autonomous nature of dApps and that no party “offers” them, we propose that the EU include a specific amendment to art. 30 to exclude software developers, those who write and publish code, from the scope of the provision to ensure that those engaged in software development are not inadvertently considered a “party offering” smart contracts.
Additionally, the letter acknowledged that certain projects could claim to be decentralized but still have points of centralization. As such, only excluding software developers from the term ensures that entities with centralized control over these protocols are held accountable.
The letter urged lawmakers to clarify that “an agreement to make data available” can only apply to “traditional contractual agreements” between two individuals or corporate entities.
The current iteration of Article 30 forces centralization due to the clause that a smart contract must have the functionality to be terminated. As mentioned above, this would not be possible without a centralized entity controlling the system.
It also recommended that the scope of Article 30 be clearly defined by specifying that “agreement” only refers to personal data, trade secrets or confidential business information.
Polygon and Ledger closed by asking lawmakers to ensure that the language and scope of the Data Act is similar to that of the Markets for Crypto Assets (MiCA) regulation, which accounts for fully decentralized cryptocurrency projects and excludes centralized entities from the requirements.
Posted in: Regulation, Technology
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