Last Thursday, the Republic of Marshall Islands passed a law to officially recognize decentralized autonomous organizations (DAOs) as limited liability companies (LLCs). The move can be considered a major win for the industry as this is the first time a country is granting formal legality to DAOs.
Dubbed ‘The Decentralized Autonomous Organizations Act 2022,’ the new legislation will allow legal entities in the country to adopt DAO structures and governance tools. However, DAOs (both for-profit and nonprofit) that wish to enjoy this LLC structure must incorporate “DAO LLC” into their titles.
A DAO is a decentralized organization with no central leadership. It is governed by community members, and typically uses smart contracts to enforce community decisions.
According to Marshall Islands’ Finance Minister Bransen Wase, the country is committing its “courts and resources” to the burgeoning world of decentralization through the adoption of the DAO Act, adding that The Marshall Islands “recognizes the unique place that decentralized autonomous organizations can hold not just in the blockchain space, but in the broader economy as well.”
Interestingly, the legislation also recognizes the internal workings of decentralized organizations, including governance principles, voting processes, tokenization, and the use of smart contracts.
Meanwhile, the act has created a new investment fund aimed at providing education and training around DAOs. MIDAO is the government entity responsible for onboarding DAOs on the Island nation. Bobby Muller, the President and Co-Founder of MIDAO, said:
We are in the midst of the blockchain revolution, and people all over the world are exploring new ways to organize and make decisions in a more efficient and egalitarian manner. Decentralized autonomous organizations present an enormous opportunity for people to organize in a more efficient and less hierarchical manner. We in the Marshall Islands recognize this unique moment to lead in this critical space.