Legal Perspectives on Kill Switch Mechanisms in On-Chain Smart Contracts: Lessons for Malaysia from the European Union Data Act

Smart contracts, built on blockchain technology, provide advantages such as transparency, automation, and reduced third-party intervention. However, their immutable nature creates significant risks when coding errors, malicious attacks, or unforeseen events occur, and such risks are further complicated by their limited compatibility with traditional dispute resolution. In response, several jurisdictions, notably the European Union through Article 36 of the Data Act, require the inclusion of kill switch mechanisms to ensure safe termination and interruption of faulty contracts. This paper examines the relevance of such mechanisms within the Malaysian legal framework. Using doctrinal legal research and comparative analysis with the European Union Data Act (EUDA), the study identifies key regulatory gaps in Malaysia. It argues that amendments to existing statutes, including the Electronic Commerce Act 2006, the Personal Data Protection Act 2010, and the Digital Signature Act 1997, are needed to legally recognize kill switches, mandate multi-factor authentication, and preserve records for audit purposes. The findings highlight the importance of these safeguards in enhancing digital safety, protecting contracting parties, and ensuring Malaysia remains aligned with global best practices in governing blockchain-based smart contracts.