Marshall Islands to Recognise DAO’s as Limited Liability Companies

Marshall Islands to Recognise DAO’s as Limited Liability Companies

The Pacific island nation has passed a law that will recognise DAOs representing crypto and blockchain projects as Limited Liability Companies (LLC). The firms will have to comply with international standards and officially identify as DAO LLC.

The Republic of Marshall Islands (RMI) has passed a legislation recognising Decentralised Autonomous Organisations (DAO) — which are decentralised communities that power crypto and blockchain projects — as limited liability companies (LLC). 

On Thursday, the Pacific island nation passed the Decentralised Autonomous Organisations Act of 2022, an extension to a reform passed by the government in February of this year that made the country the world’s first jurisdiction to recognise DAOs as legal entities under the Non-Profit Entities Act 2021. 

DAOs are blockchain-powered organisations that enable new forms of collective action and decision making, and are widely used in decentralised applications (dApps), non-fungible tokens (NFT), charitable causes and decentralised finance (DeFi) projects. 

“With this adoption of the DAO Act of 2022, The Marshall Islands commits its courts and its resources to the burgeoning world of decentralisation, and recognises the unique place that decentralised autonomous organisations can hold not just in the blockchain space, but in the broader economy as well,” said RMI Finance Minister Brensen Wase. 

According to the announcement, the RMI government will provide blockchain-enabled companies, like crypto and NFT projects, with an internationally recognised LLC structure under the condition that they identify as DAO limited liability companies. This means the firms will be required to add DAO LLC as part of their registered names. The new legal framework will cover both for-profit and not-for-profit DAOs, and will also consider internal governance processes of the entities, such as voting on project proposals and issuance of digital tokens. 

Marshall Islands to Recognise DAO’s as Limited Liability Companies

The government has established a registry process for DAOs interested to be recognised as legal entities called the Marshall Islands DAO, or MIDAO. The federal agency will be responsible for onboarding crypto and blockchain companies that wish to register as LLCs in the island nation. In his statement, Wase added that the new law is based on the experience that Marshall Islands has when it comes to registration of international businesses and related compliances. 

RMI is fast becoming a global hub for the crypto industry. In 2020, as part of its plans to reduce dependency on the US dollar – which is the official currency, the government announced that it will be releasing a blockchain-based national digital currency called the Marshallese sovereign (SOV). 

The Island nation first announced its plans to create the SOV in February 2018, when it passed the ‘Declaration and Issuance of the Sovereign Currency Act’ to make the digital token a legal tender. But the programme has faced backlash from several global financial organisations, including the International Monetary Fund (IMF).

In September 2018, the IMF issued a report on the Marshall Islands’ digital currency initiative, saying that its launch of a second legal tender “would increase macroeconomic and financial integrity risks, and elevate the risk of losing the U.S dollar correspondent banking relationship,” as reported by The Block. 

However, the RMI ignored the IMFs warnings and is moving forward with its SOV project. SBF technologies, who’s been assigned by the government to head the initiative, has chosen Algorand blockchain to power the world’s first decentralised national digital currency. 

“We are in the midst of the blockchain revolution, and people all over the world are exploring new ways to organise and make decisions in a more efficient and egalitarian manner. Decentralised autonomous organisations present an enormous opportunity for people to organise in a more efficient and less hierarchical manner,” said Bobby Muller, former RMI Chief Secretary, and President and co-founder of MIDAO. 

Also Read Institutional Brokerage Firm ‘Hidden Road’ Secures Digital Asset License From UK’s Financial Watchdog

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