The State of Wyoming has recognized Decentralized Autonomous Organizations (DAOs) as a new type of limited liability company. The law will come into force on July 1, 2021.
Wyoming Governor Mark Gordon has signed legislation allowing decentralized autonomous organizations to formally register as a legal entity. The bill was proposed by state legislators earlier this year. DAOs are governed by the terms of smart contracts without the hierarchical management structure found in traditional companies.
With this news shared
Caitlin Long, founder and CEO of digital asset bank Avanti, praised Wyoming lawmakers and Governor Mark Gordon for keeping up with the times and setting an example for other states.
AND IT’S OFFICIAL!! #Wyoming will recognize #DAOs as a new type of LLC, effective July 1! Thank you legislators & @GovernorGordon for building on Wyoming’s history of inventing the LLC, which all other states followed roughly a decade later. We’re doing it again! A thread. 1/ pic.twitter.com/4x7VpcPTkk
— Caitlin Long (@CaitlinLong_) April 21, 2021
The bill, proposed by the Wyoming Special Committee on Blockchain, Financial and Digital Innovation, was passed by the State Senate in March. Long said the new law addresses several important legal issues, such as the joint liability of all DAO members, provided that the court recognizes this as a partnership.
Unlike conventional limited liability companies, the Wyoming secretary can “remove the defense from liability” from a DAO that is involved in fraud and other illegal activities. This means that only law-abiding projects will be able to operate in Wyoming.
Professor Aaron Wright of Cardoso Law School, who helped draft the bill, stated
earlier this year that “well-intentioned DAO creators will have tremendous freedom to structure their work using any combination of statutory documents, legal agreements or smart contracts.”
Wright also clarified that the law should cut costs for the DAO. “Creating a legally recognized DAO could cost hundreds of dollars instead of tens of thousands (at least in the US),” he said. Until now, there have been no laws – globally – that recognize and define DAOs in the same way as business structures such as limited liability companies, although there have been attempts to give DAO legal status in Malta.
Wyoming is one of the most cryptocurrency and blockchain-friendly regions in the United States. Last spring, Wyoming authorities allowed local insurance companies to invest in crypto assets, including bitcoin. In addition, last fall it became known that the Kraken exchange would open its own bank in Wyoming, and the Avanti cryptocurrency bank received a license from the state regulator.
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