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The European Union (EU) is looking to reduce the regulatory scope for smart contracts, the Block reported on Thursday. Among other things, the EU might scrap the regulations that require smart contract traders to make a conformity assessment and sign a mandatory declaration that they satisfy EU standards.
New EU Draft Proposal Hints at Eased Smart Contract Regulation
The EU could reportedly ease its regulatory requirements for crypto smart contracts, according to a draft proposal seen by the Block. After EU policymakers agreed on a new text of the Data Act, the draft proposal shows that the EU might alleviate the burdensome regulatory plans for smart contracts – blockchain-based computer programs powering decentralized finance (DeFi).
Specifically, the proposal suggests that those who trade smart contracts may no longer need to perform a conformity evaluation and sign an obligatory declaration that they comply with EU regulations. Further, the proposal also scrapped the requirements for smart contracts to satisfy the “harmonized standards,” which refer to technical compliance terms.
In addition, the proposal reduces the scope to only address “the contractual party offering a smart contract,” as opposed to an earlier regulatory framework that covers vendors or professionals involved in the launch of smart contracts.
Legislation Retains Strict Rules to Regulate Crypto
The EU intends to regulate smart contracts within the scope of its comprehensive strategy for data markets. This legislation is expected to significantly impact the crypto space, as these contracts, written in software code, form the foundation of DeFi’s infrastructure.
While it may seem that the EU might loosen its control over crypto, the legislation retained multiple standards to regulate the volatile sector and smart contracts. These include strict “access control mechanisms” and protection of trade secrets implemented into the design of these contracts.
The committee overseeing negotiations on the file is set to vote to adopt the document on Feb. 9. If adopted, the text will then go through a plenary vote in the European Parliament, currently scheduled for March. Subject to its approval in the parliament, the file would proceed to inter-institutional talks with the European Commission and European Council.
The draft legislation comes several months after the EU said it could introduce new regulations to cover the major risks presented by DeFi, the most targeted crypto sector by cybercriminals. A recent report by TRM Labs showed that a record $3.7 billion worth of crypto funds were stolen during 2022, forcing US government agencies, including the FBI, to make moves.
Do you think that smart contracts should not be heavily regulated as initially intended? Let us know in the comments below.