The European Union Parliament approved a bill to mandate a kill switch in the Defi protocols, to control the Defi platform under any critical situation.
The European Union (EU) is a very big region in the world, where crypto adoption is at a tremendous level. In the present time, crypto companies are providing services under the existing traditional rules & regulations. In 2022, The Markets in Crypto Assets (MiCA) agency completed its work to create a new crypto regulation framework in the EU and that framework may come into effect by 2024 or even may take more time.
On 14 March 2023, The European European Parliament passed the Data Act. This bill includes provisions to allow the use of the crypto industry’s financial activities data, to push innovations in the digital sector.
Parliament’s bill believes that such new laws will help to bring better use of the resources to train algorithms and lower prices for device repairs.
The most important thing in this bill is a “kill switch”. Under its provisions, there are requirements for all the decentralised finance (Defi) based protocols to use an option, which can stop the financial activities with full safety.
“The smart contract shall include internal functions which can reset or instruct the contract to stop or interrupt the operation. (…) Especially, it should be assessed under which conditions non-consensual termination or interruption should be permissible.”
On this latest proposed EU law, many crypto entrepreneurs & proponents shared their opinion and noted that it will not be easy for all the Defi protocols to have a similar kind of switch containing smart contracts.
OpenZeppelin head of solutions architecture Michael Lewellen said that Uniswap like Defi crypto exchanges can’t use such kill switches.
Professor Thibault Schrepel of the Vrije Universiteit Amsterdam also shared his personal opinion on this new EU law and said that if it will happen then surely it will be tough for the Defi protocol users to understand who controls the platform.