Polygon Labs Publishes Open Letter Addressing EU Authorities, Proposes Better DeFi Regulation

As discussions over new regulatory frameworks for the cryptocurrency protocol, blockchain, digital asset and general decentralized scene gain traction, representatives of Polygon Labs, one of the largest Web3 ecosystems, share their opinions on critical improvements needed in the EU.

No more restrictions for DeFi devs: Polygon Labs’ open letter to EU

Today, on April 17, 2023, Polygon Labs, the development team that coordinates and oversees the progress of Polygon (MATIC) blockchain, published an open letter to representatives of the European Parliament, the Council of the European Union and the European Commission. The letter addresses the proposed changes to Article 30 of Data Act: Measures for a Fair and Innovative Data Economy, a crucial document for tech regulation in Europe.

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

Basically, the proposed amendments are designed to exclude 100% permissionless technologies and their creators (for instance, open source contributors) from the scope of data regulation.

Instead, the document will focus on permissioned distributed systems that can be controlled by a business entity or individual. Developers of permissionless systems (on-chain or noncustodial services) should not be held accountable for the processes and activities their code might be used in:

Clarify the term ‘party offering smart contracts’ to exclude software developers of decentralized protocols and applications.

Rettig highlights that the proposals can align the Data Act with the existing regulatory documents and frameworks:

These proposed amendments will bring the the Data Act into alignment with #MiCA’s exclusion of ‘crypto-asset services…provided in a fully decentralized manner,’ while ensuring that EU policymakers can achieve the Act’s goals of data protection for users and businesses.

Regulators should clarify definition of “data”

Also, regulators have been asked to narrow the definition of data: as smart contracts operate in a fully permissionless manner, no one can be charged for possible data abuse.

As such, “crypto-asset services…provided in a fully decentralized manner should be excluded from the scope of Art. 30 of Data Act,” the letter says.

Another cryptocurrency sphere heavyweight, Ledger, a producer of hardware wallets, took part in the preparation of the letter.

As covered by U.Today previously, one year ago, 40 cryptocurrecy companies sent an open letter to the EU finance ministers to prevent them from implementing draconian AML rules.