Decentralized Autonomous Organizations (DAOs) Regulation
The United Kingdom’s Law Commission has recommended regulating DAOs under existing financial regulations and tax frameworks, stating that a separate oversight entity may not be necessary at this time. The commission emphasized the need to monitor the situation while acknowledging the complex nature of DAOs and the various types they can exist in.
Types of DAOs and Legal Implications
DAOs can take different forms such as pure DAOs, hybrid arrangements, and digital legal entities, leading to varying legal implications based on their structure. The Law Commission highlighted that the type of DAO would determine the applicable laws, with some DAOs falling under the Financial Services and Markets Act 2000 if they engage in specified activities related to specified investments.
Challenges in Regulating DAOs
The Law Commission concluded that a uniform approach to regulating DAOs may not be suitable at this time and does not recommend a bespoke legal framework for DAOs in England and Wales. The commission also acknowledged that completely decentralized DAOs could still face legal actions if smart contracts are utilized, highlighting the evolving nature of DAO regulation.
