Legal DAOs: Why are the Marshall Islands betting on a decentralized future?
The Republic of the Marshall Islands made history in the second week of February after it formally recognized decentralized autonomous organizations (DAOs) as legal entities.
The Marshall Islands revised its Non-Profit Entities Act 2021, making it possible for any DAO to register and commence operations in the country. The amendments to the law mean DAOs can now incorporate as nonprofit LLCs with bylaws and membership that can be recorded on the blockchain.
The Pacific state nation on-boarded MIDAO Directory Services Inc., a domestic organization to help other DAOs register in the Republic. This led to the registration of the first legal DAO in the form of Admiralty LLC for Shipyard Software, a decentralized finance- (DeFi-) focused infrastructure developer.
MIDAO co-founder Adam Miller explained the reasons behind their decision to work with the Marshall Islands government and help other entities register their legal DAO in the country:
Admiral DAO will be the organizational entity in charge of regulating Clipper — a decentralized exchange (DEX) developed by Shipyard — on behalf of the community and future DEXs built by Shipyard.
Many existing laws and institutions creating legal entities have not yet taken the unique legal implications of DAOs into account.
As a result, implementing a DAO is not an easy task, even in regions with favorable regulations for nascent technology such as blockchain.
Many jurisdictions require bylaws to be recorded in a specific manner with the government, while blockchain code may be irreversible. In addition, many legal corporations are required to keep track of membership using a ledger of names, whereas DAOs often use tokens. This means that most well-known options only provide partial options
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