California is taking steps to establish a legal framework for Decentralized Autonomous Organizations (DAOs) and blockchain technology with the introduction of Assembly Bill 1229 by San Francisco Assembly member Matt Haney. The bill has already garnered support from prominent crypto investment firm Andreessen Horowitz and the Crypto Council for Innovation, reflecting a growing recognition of the potential of DAOs in the state.
Miles Jennings, General Counsel at a16z crypto, expressed enthusiasm for California leading the way in this area, stating, “We have long been supportive of reasonable regulation that puts guardrails in place while giving innovators the certainty they need to keep building, which is exactly what this legislation does.” The bill aims to provide clarity and legitimacy for DAOs, allowing them to incorporate in California, pay taxes, and provide better protection for Californians participating in the Web3 economy.
A DAO is an organizational structure where control is distributed among its members, and decisions are made through smart contracts on a blockchain, utilizing governance tokens for voting. Assemblymember Haney’s spokesperson stated, “Our goal is to educate our colleagues on blockchain basics, California corporations, and the workings of Decentralized Autonomous Organizations (DAOs). By establishing a legal framework around DAOs, we can create certainty, legitimize this organizational type, and ensure appropriate taxation in California.”
The introduction of Assembly Bill 1229 comes at a crucial time, as government regulators and officials worldwide are increasingly focusing on cryptocurrency. In November 2022, the collapse of FTX, a cryptocurrency exchange, triggered a crypto crackdown led by the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) in the U.S. State regulators have also heightened their scrutiny of crypto projects.
Assembly member Haney emphasized the importance of keeping up with technology, stating, “It would be devastating to both our economy and our identity as a state to lose California’s place as the world’s tech leader because our laws are not keeping up with the times.” This move towards providing a legal framework for DAOs and blockchain technology reflects California’s commitment to innovation and positioning itself as a leader in the emerging Web3 economy.
On the other hand, Representative Brad Sherman, a Democrat from Southern California, has expressed concerns about cryptocurrency, likening it to a “garden of snakes” during a recent congressional hearing on the FTX exchange collapse. However, Assemblymember Haney’s approach reflects a more forward-thinking and proactive stance towards embracing the potential of blockchain technology and DAOs in California.
As California takes steps towards establishing a legal framework for DAOs, the outcome of Assembly Bill 1229 could have significant repercussions for the state’s crypto sector. Providing clarity and legitimacy for DAOs could attract more innovators and investors to California, solidifying its position as a high-tech leader and fostering further growth in the Web3 economy. With support from prominent players in the crypto industry, California’s approach to regulation and innovation in the blockchain space is being closely watched by stakeholders worldwide.