Marshall Islands Legally Recognize DAOs as Domestic Limited Liability Companies

Marshall Islands Legally Recognize DAOs as Domestic Limited Liability Companies

• Marshall Islands have legally recognized decentralized autonomous organizations (DAOs) as domestic limited liability companies (LLCs).
• The Decentralized Autonomous Organizations Act is applicable to both for-profit and nonprofit DAOs.
• Those DAOs wanting to have an LLC structure will have to add “DAO LLC” to their names.
• The legislation recognizes DAO governance principles and voting processes and frameworks. It also gives definitions and regulations regarding DAO formation and the use of smart contracts.

Marshall Islands have legally recognized decentralized autonomous organizations (DAOs) as limited liability companies (LLCs), the island country’s government announced on Thursday.

The Decentralized Autonomous Organizations Act enables legal entities registered in the country to formally adopt DAO structures and governance tools. The law applies both to for-profit and nonprofit DAOs.

A DAO is an entity with no central leadership and decision-making authority. Decisions in a DAO are made from the bottom up by community members. Most DAOs use some sort of a token voting system wherein the more tokens one holds, the more voting power one has.

“With this adoption of the DAO Act of 2022, The Marshall Islands commits its courts and its resources to the burgeoning world of decentralization, and recognizes the unique place that decentralized autonomous organizations can hold not just in the blockchain space, but in the broader economy as well,” said Marshall Islands’ Finance Minister Bransen Wase. The new law states that those DAOs that want to have an LLC structure will have to add “DAO LLC” to their official names. The legislation also recognizes DAO governance principles, voting processes, and frameworks, as well as provides definitions and regulations for forming a DAO and using smart contracts.

The act has also created a new investment fund for the country’s government to continue providing education and training around DAOs to further integrate the concept into the nation’s economy.

Marshall Islands is one of the leaders around the world when it comes to regulatory approaches towards DAOs. In February of this year, the country became the first nation ever to recognize DAOs as legal entities in a bid to become a global hub for the development of DAOs.

“We are in the midst of the blockchain revolution, and people all over the world are exploring new ways to organize and make decisions in a more efficient and egalitarian manner. Decentralized autonomous organizations present an enormous opportunity for people to organize in a more efficient and less hierarchical manner. We in the Marshall Islands recognize this unique moment to lead in this critical space,” said Bobby Muller President and Co-Founder of MIDAO, the government entity responsible for facilitating the process of incorporation of DAOs.

On the Flipside

• It’s unclear when the new legislation will take effect.

Why You Should Care

DAOs are one of the most important blockchain-enabled technologies in the world. Seeing Marshall Islands’ favorable regulatory stance on DAOs is an encouraging sign to the crypto community and developers.

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