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Mark Gordon, the governor of Wyoming, signed the DUNA Act on March 7 and it will be effective from July 1, which pertains to DAOs.
Wyoming has released a law to legally recognize decentralized autonomous organizations (DAOs). Mark Gordon, the governor of Wyoming, signed the Decentralized Unincorporated Nonprofit Association Act (DUNA) into law. It marked a remarkable moment in the legal and regulatory landscape for blockchain and digital assets. This new bill will be effective on July 1, 2024.
Wyoming’s Take on Adoption of Crypto
The state of Wyoming has always desired to become a major hub or center for blockchain technology and crypto companies. It wanted to achieve a position like Delaware has in the corporate world.
Implementing this new law is a component of a broader attempt to attract blockchain companies and innovators to the state by giving them structured legal frameworks and supportive regulatory environments.
This act reflects Wyoming’s proactive strategy in dealing with some complex legal issues that come up with a developing sector. These issues include integrating decentralized self-governing structures into existing traditional financial regulations.
State legislators and prominent industry players have jointly taken some actions that resulted in this new legislation. The legislation aims to address the urgent legal ambiguities associated with DAOs that function in a way similar to that of non-traditional corporate entities. It thus uses community-run governance systems instead of centralized leadership.
Legal Framework for Decentralized Autonomous Organizations
The Decentralized Unincorporated Nonprofit Association Act creates a new legal structure and framework for DAOs that distinguishes them from traditional corporate entities such as LLCs.
This segregation is essential as it aligns with the nonprofit structure of many DAOs that do not desire to earn a profit for their members but rather achieve common projects and actions. This new law will enable DAOs to interact with third parties, prosecute, control, and handle tax liability issues more efficiently. It allows every member not to bear the entire weight of the acts.
This regulatory architecture is expected to ease some of the regulatory barriers that DAOs encounter. It will specifically refer to securities laws and ownership transparency requirements that have become difficult for decentralized entities.
It recognizes DAOs as unincorporated nonprofit associations; the law of the State of Wyoming allows these entities to function within a legal framework. That implies certain rights and duties, like those of conventional businesses.
Implications of the Updated Legislation
The introduction of this updated legal structure for DAOs in Wyoming is expected to have far-sighted implications for the crypto industry. Other states or countries might also follow this initial model. Some critical concerns have also been addressed, and some regulatory bodies have raised them regarding the accountability and governance of DAO.
Preston Byrne, a crypto-focused lawyer, has called this updated law far better than the previous attempts at DAO legislation. The previous law did not fully recognize the crypto-related aspects of DAOs and instead treated them as member-managed LLCs.
Tennessee and Vermont treat DAOs as LLCs, which is similar to the previous model of Wyoming. Other US states did not have any legislation in effect in comparison to this one.
Nevertheless, the effectiveness of this law in attracting DAO to register in Wyoming and its acceptance by the broader crypto community is yet to be seen.
Challenges Ahead in the Path of Implementation
Given the inherently decentralized and often anti-establishment values of existing DAOs, there are expected challenges, especially in convincing such organizations to adopt and implement this new legal framework.
Moreover, the response of federal regulators, such as the Securities and Exchange Commission (SEC), to this new and updated approach will be critical and essential to observe as the landscape grows.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
