In a consultation released today, the Law Commission of the United Kingdom is looking into issues like the structure and governance of Decentralized Autonomous Organizations (DAOs)— the various platforms governed by code that frequently serve as the foundation for projects in decentralized finance (DeFi).
They will also check if these organizations are complying with regulations like those relating to corporate reporting, money laundering, and taxes. Further, they will also check the legal liability of open-source code developers and the status of investors and token holders.
DAOs, according to Law Commissioner Sarah Green, provide market participants with a number of advantages, but it is unclear what the laws and regulations are about them. The objective, according to her, is to agree on the best approaches to describe the features of DAOs and to identify British laws that could support their development.
Green once advised a news organization that cryptocurrency should be viewed as an actual possession. In November 2021, a commission examined smart contracts; its recommendations regarding the use of digital records as receipts in international trade have already been put up as a legislative proposal.
Recently, Carolyn Wilkins, a member of the Bank of England’s financial-stability committee questioned DeFi’s governance mechanisms and said that poor decision-making in the DeFi world can lead to a crisis like the 2008 crash.
She said that there will never be a set of smart contracts suitable for every circumstance, and when the unexpected occurs, centralized decision-making will always be required.
Wilkins argues that DeFi structures can concentrate knowledge and power in the hands of those with the most tokens or coding expertise— which is in here opinion, is unfair.