The Marshall Islands has been a popular territory for DAO establishment since 2022 when the government passed the law titled ‘Decentralized Autonomous Organizations Act of 2022’ that recognizes DAOs and enables legal entities registered in the country to formally adopt DAO structures and governance tools. Last week, the parliament of the Republic of the Marshall Islands passed legislation that takes its existing DAO framework a step further and improves the region’s environment for DAOs.
So how is the amended ‘Decentralized Autonomous Organizations Act’ different from the previous law? Firstly, the Decentralized Autonomous Organization Act of 2023 ensures a faster DAO registration time – a maximum of 30 days, compared to 30-60 days in the Act of 2022. Secondly, it exempts DAOs from responsibility for the use of open-source software they created.
Furthermore, the new version of the Decentralized Autonomous Organizations Act simplifies the process of establishing a DAO. To set up a DAO, there is no need for a board of directors. Written or paper records are not required as well as long as data are stored on the blockchain. Besides, every member of the DAO could be anonymous, except for one person.
The authors of the bill are Member of Parliament David Paul and MIDAO CEO Adam Miller. Notably, MIDAO is an organization that DAOs incorporate in the Marshall Islands. Its mission is to combine the expertise of the Republic of the Marshall Islands as a global shipping jurisdiction with cutting-edge blockchain-friendly legislation to create a groundbreaking legal entity solution for DAOs and Web3 projects.
MIDAO acts as a registered agent to complete the process of establishing a DAO and an intermediary party between the government and investors. All you need to do is go to MIDAO’s website and apply for registration. Once the name and purpose of your DAO are defined, the founding members draft the Operating Agreement and pass the KYC process with the local regulator. Apart from the founders, anyone who holds 10% or more governance rights over the company must pass the KYC process. Next, the founding members sign the drafted Operating Agreement, Certificate of Incorporation, and Foreign Business Investment License form and file these documents with the regulator. Once everything is settled with the documents, the regulator sends the Charter of the limited liability company to the founders.
According to Adam Miller, the amended law is the “most comprehensive law for DAOs globally,” and it has the potential to become a “blueprint for the rest of the world for regulating DAOs”.
Adam Miller stated:
“This one is the truly groundbreaking crypto law because it addresses every major issue that lawyers from around the world have brought up related to Web 3 and in particular, DAOs.”
Since passing the previous act, the Marshall Islands has incorporated nearly 100 DAOs. With a simplified regulation, this number is expected to soar.
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