- The EU’s newly published Markets in Crypto Assets (MiCA) regulation focuses on fostering competition, innovation, and transparency in digital assets, with a commitment to assess decentralized finance for additional regulations.
- The impending Data Act, meant to govern data sharing in Internet of Things products, includes a provision on smart contracts that could impose potentially unfeasible requirements on smart contracts operating on public blockchains.
The European Union is making strides in devising a comprehensive legal and regulatory structure for digital assets. Recently, the EU released the Markets in Crypto Assets (MiCA) regulation, a move aimed at fostering competition, innovation, and transparency. The MiCA regulation underscores EU policymakers’ commitment to review decentralized finance – a blockchain-enabled financial system bypassing intermediaries – and consider supplementary regulations to boost the MiCA.
Concurrently, European policymakers are deliberating data sharing regulations under the Data Act. This impending legislation, primarily intended to control data sharing related to Internet of Things (IoT) products such as smart devices, intriguingly includes a provision on smart contracts. These are self-executing contracts with the terms of the agreement directly written into lines of code, a significant pillar of blockchain technology.
Although the legislation is not designed to regulate smart contracts outside its purview, the smart contract provision may inadvertently unleash far-reaching repercussions. The current proposal could foist impractical requirements on smart contracts anchored on public blockchains. These demands might include contract termination and interruption features, among other provisions. Advocates for blockchain clarity suggest that adding further language to define the Data Act’s scope aligns with the legislative intent and helps avoid potential misinterpretation.
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The efficacy of blockchain technology relies significantly on smart contracts. They form the infrastructure of the burgeoning decentralized finance ecosystem, enhancing the efficiency, security, and resilience of payments. Smart contracts can facilitate a plethora of programmable actions on the blockchain, from lending arrangements for small businesses and access to inclusive insurance to automating payments upon goods’ confirmed receipt.
By settling MiCA, Europe has strengthened its position as a notable global force in blockchain. Stakeholders are optimistic that EU authorities will delineate the Data Act’s scope, thereby safeguarding the industry’s consistent growth and evolution. They anticipate engaging more with European policymakers on crafting a comprehensive, effective legal and regulatory fabric that underpins digital assets and blockchain technology, creating a robust platform for future growth.
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