Polygon calls on EU lawmakers to address smart contracts in Data Act

The project claimed that the bill as currently written could “substantially inhibit innovation and economic growth” in the EU without amendments to clarify the role of smart contracts.

Polygon Labs, an Ethereum layer-2 scaling solution, has called on policymakers in the European Union to “clarify the scope and intent” in legislation targeting smart contracts.

In an open letter published to members of the European Parliament, the European Council, and the European Commission on April 17, Polygon proposed Article 30 under the Data Act be amended to apply to permissioned smart contract based-systems owned and operated by an ‘enterprise’, as opposed to permissionless under the current wording. The platform said hardware wallet developer Ledger had also signed up to request the legislation better reflect its intent.

“Polygon Labs has an interest in this matter because we seek to ensure the growth and responsible development of permissionless blockchain-based systems globally,” said the letter. “We respectfully request that you consider the proposed revisions to Art. 30 […] to ensure that this new law does not inadvertently capture open, transparent and permissionless parts of emerging blockchain technology.”

1/ Today @0xPolygonLabs published an open letter to the EU on Art. 30 of the #DataAct, which could have serious consequences for permissionless smart contracts. @Ledger has joined in proposing amendments to narrow Art. 30 to protect decentralized software development. Read pic.twitter.com/AZHGCm14sQ

— Rebecca Rettig (@RebeccaRettig1) April 17, 2023

Article 30 in the version of the Data Act passed by the European Parliament in March detailed ‘essential requirements regarding smart contracts for data sharing’. Polygon claimed that should the act pass without amendments to clarify the nature of parties — if any — operating smart contracts, the legislation “would not be enforceable for open, permissionless and decentralized smart contract applications and would substantially inhibit innovation and economic growth in the EU.”

Other experts have raised similar concerns with the Data Act potentially affecting the way regulators could handle smart contracts. Michael Lewellen, head of solutions architecture at OpenZeppelin, told Cointelegraph in March that the wording which would allow for a ‘kill switch’ of smart contracts “undermines immutability guarantees and introduces a point of failure.”

Polygon requested the Data Act “remain consistent” with the Markets in Crypto Assets framework, scheduled for a final vote on April 19 after extensive negotiations between the European Parliament, the European Council, and the European Commission. The Data Act will likely face similar treatment from EU policymakers before reaching the final form of the law, giving Polygon’s request time for consideration.

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