Regulatory issues facing DAOs

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The problem with being a trailblazer is that eventually, you run out of a trail to blaze and you have to be careful with the direction you take thereafter. Blockchain organizations, otherwise known as Decentralized Autonomous Organizations (DAOs), are just encountering this problem.

The legal system is not designed for the possibility of a flexible organization that takes collective action, while nobody is really in control. DAOs are an open-source blockchain protocol governed by a set of rules implemented as a smart contract. All the rules of the organization are enforced by code running on the blockchain.

Effectively, DAOs have managed to invent leaderless leadership.

This creates unique legal headaches, after all, if something goes wrong, who is responsible? Are the designers of the DAO responsible? Or the developers in charge of maintaining the system and enacting policies? Or are the users who voted for a policy? Or maybe everyone even vaguely associated with it, as DAOs could legally be interpreted as general partnerships?

These issues all stem from the fact that the existing laws around business, corporate structure, securities, and liability do not contemplate this sort of organization as until recently they didn’t exist.

Yet, this regulatory uncertainty is holding back the development of DAOs. After all, who’s to say that tomorrow there won’t be new laws that completely invalidate a particular business model? Hence, a lot of good ideas aren’t being tried out, as innovators have taken a “wait and see” approach to the upcoming regulation. 

There are more questions than answers, as the law is struggling to catch up to blockchain innovation. But perhaps a good starting point would be to ask what law is even applicable. After all, a DAO is decentralized, meaning that you can’t even point to a particular server to say where it might be headquartered. 

Answering these heady matters, and more, is precisely what the WACEO was established to do. DAOs have the potential to change the world, but they can’t do it alone. 

The industry needs a clear set of guidelines that ensure that it can adequately operate in all jurisdictions. But this alone is not enough, we also need laws.

WACEO is leading the charge in that regard to voice the collective wishes of the industry and lobby regulators to enact the policies that would benefit the development of our community.

We will eventually get the industry that we deserve. If we don’t do anything, the industry will become the corporate nightmare that the modern internet has become, where a handful of megacorporations have unchecked control over billions of dollars.

However, if we put the time, effort and resources into building the industry we could potentially have, then we might yet have the opportunity to change the world for the better!

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