DAO Legal Reforms in Spotlight as UK Law Commission Seeks Views

The U.K.’s Law Commission is looking at how Decentralized Autonomous Organizations (DAOs) should be treated under the legal system, the latest in a series of forays into digital technologies by the influential body.

A consultation published today is looking into questions such as how DAOs, the disparate platforms governed by code which often underpin projects in decentralized finance (DeFi), are structured and governed, and how they comply with obligations like taxes, money laundering and the corporate reporting.

“DAOs are said to offer multiple benefits to market participants… yet their legal and regulatory status is unclear,” said Law Commissioner Sarah Green in a statement. “Our work will aim to build consensus on the best ways of describing the constituent elements of DAOs and to highlight ways in which the law of England and Wales might foster their development.”

The probe will look into issues like the relationship between DAOs and corporations; the status of investors and token holders; the legal liability of open-source code developers; and the ways in which DAOs tackle money laundering, file annual reports and pay taxes, the commission said.

The commission, a government-funded independent body charged with reviewing and updating the legal code in England and Wales, has already probed the legal status of crypto assets in a document published in July. Treating crypto as a new kind of legal property could have implications if, say, your computer is hacked and non-fungible tokens (NFTs) stolen, Green previously told CoinDesk in an interview, and final recommendations are due next year.

A commission review of smart contracts concluded in November 2021, and its proposals on using electronic documents as receipts in international trade have already been proposed as a legislative bill.

In the U.S., courts are considering procedural questions such as how the Commodity Futures Trading Commission can serve legal documents on Ooki DAO, and whether the unconventional structures are immune from regulatory enforcement.

Read more: How Crypto Might Shake Up England’s Ancient Property Laws