DAO-Specific Legislation Isn’t Needed Yet, English Legal Body Says

As a researcher with a background in law and experience in studying decentralized autonomous organizations (DAOs), I find the recent report from the Law Commission of England and Wales on the legal status of DAOs both intriguing and thought-provoking. The commission’s position is that existing laws may apply to DAOs, making it unnecessary to create a new legal framework at this time.

The Law Commission of England and Wales has announced that it does not propose establishing a fresh regulatory structure for Decentralized Autonomous Organizations (DAOs) due to the possibility that they may already be subject to current laws mandating business authorization to legally function in the U.K.

As a researcher studying Decentralized Autonomous Organizations (DAOs), I have come across an important observation regarding their regulatory status under the Financial Services and Markets Act 2000 (FSMA) in the United Kingdom. If a DAO engages in “specified activities” relating to “specified investments,” it may fall under the jurisdiction of this act.

Unauthorized companies are prohibited from marketing their products or services to U.K. consumers through the use of advertising tokens.

As a crypto investor, I’ve noticed that the legal status of Decentralized Autonomous Organizations (DAOs) has been a topic of intense debate lately. The U.S. courts are currently grappling with how to classify and regulate these entities. Since every DAO operates differently due to its unique governance structure and smart contracts, it’s possible that they may be subject to varying laws. A one-size-fits-all legislative approach might not be feasible or effective in this case.

At this point in the evolution of Decentralized Autonomous Organizations (DAOs) in England and Wales, it’s advisable against creating a custom legal framework for them. The reason being, there is no clear agreement on what constitutes a DAO, how it should be organized, or what a distinct legal entity for a DAO would entail.

The type of a DAO (Decentralized Autonomous Organization) determines the specific public law that applies to it, according to the report. Some DAOs can be considered as unincorporated associations, where participants follow predefined rules and are accountable solely for their individual actions.

In certain situations, a Decentralized Autonomous Organization (DAO) might be required to make corporation tax payments. It is recommended that an international tax structure specifically designed for DAOs be taken into account, according to the commission’s suggestion.

From a legal standpoint, a completely decentralized DAO, free from any central authority, remains vulnerable to civil litigation by outside parties, regulatory enforcement actions, or even criminal prosecutions, according to the report’s findings. The report also pointed out that “a smart contract represents a legitimate contractual agreement.”

Previously, the commission played a role in creating laws to convert paperwork into digital format, thereby opening up opportunities for employing distributed ledger technology in commerce. Recently, they requested feedback on proposed legislation that classifies cryptocurrencies as assets.

The report recommended that a group such as the Jurisdiction Taskforce, comprised of judiciary members, Law Commissioners, regulators, and other legal experts, conduct a more comprehensive examination of circumstances under which fiduciary duties could be applicable to software developers.