The Decentralized Autonomous Organizations Act of 2022 has been declared law by the Republic of the Marshall Islands, a sovereign island nation in the Pacific Ocean.
The law recognizes decentralized autonomous organizations (DAO) and permits legally recognized organizations registered in the nation to formally adopt DAO structures and governance tools. The government hopes this action will promote the expansion of decentralized organizations and the state’s supporting components.
Bransen Wase, the finance minister of the Republic of the Marshall Islands, said that by passing the DAO Act of 2022, the island nation has committed its courts and resources to the developing decentralized market and acknowledged the particular position that decentralized autonomous organizations can occupy not only in the blockchain space but also in the larger economy.
The law expresses that the DAO Act of 2022 will permit DAOs to register as limited liability companies (LLCs), allowing them to use the name DAO LLCs. Both for-profit and nonprofit DAOs can register under the act, which will also define and regulate DAO formation, agreements, and smart contract usage.
DAOs could already register and start operations in the Marshall Islands thanks to the country’s formal recognition of them as legal entities in February. However, the new law is a step ahead and permits organizations to register as DAO LLCs and to designate themselves as such.
The new legislation also permits the establishment of an investment fund so that the Marshall Islands government can continue providing DAO-related training and education programs.
Sarah Green, the UK’s Law Commissioner, stated that although DAOs offer market participants many benefits, it is unclear what laws and regulations apply to them. She claims that the goal is to reach a consensus on the best methods for describing the characteristics of DAOs and to determine which British laws might encourage the formation of these organizations. It implies that top regulators of other countries do not have anything against DAOs either.