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Date : July 23, 2024
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UK Law Commission Seeks Evidence on DAOs — Expert Says ‘New Legal Forms Are Required’

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The United Kingdom Law Commission recently asked experts and users to participate in a ten-week exercise whose objective is to help the commission better understand how decentralized autonomous organizations (DAOs) operate. A blockchain expert says the commission’s call shows that the U.K. is “leading the way in thinking and developing the law and other institutions that are needed.”

Legal and Regulatory Status of DAOs Not yet Clear

The United Kingdom Law Commission recently said it is seeking experts’ opinions on decentralized autonomous organizations (DAOs) and how the laws of England and Wales can accommodate them. In a statement released on Nov. 16, the commission acknowledged that thousands of DAOs exist today, yet only a “few appear to be structured using the law of England and Wales.”

In addition to the ambiguities over what constitutes a DAO, questions have been raised about their legal status and “the liabilities of those who participate in them, and the rules and regulations that apply to them.” Consequently, the commission said it has been asked by the U.K. government to probe all of these issues.

Commenting on the commission’s plan to seek expert views, Sarah Green, the law commissioner for commercial and common law, said:

“DAOs are said to offer multiple benefits to market participants, incentivizing cooperation and innovation, levelling playing fields, reducing the scope for human error, lowering costs, and increasing transparency. Yet their legal and regulatory status is unclear. Our work will aim to build consensus on the best ways of describing the constituent elements of DAOs and to highlight ways in which the law of England and Wales might foster their development.”

‘New Legal Forms Are Required’

Reacting to the Law Commission’s call, Alex Simms, an associate professor at the University of Auckland, told Bitcoin.com News that such a move “demonstrates the growing recognition of the importance that DAOs will play.” According to Simms, this will not just apply in the Web3 world, “but also as a new way of forming and operating organizations.”

Simms, a blockchain researcher and systems thinker, also described the Law Commission’s call as a recent example that shows that the U.K. is “leading the way in thinking and developing the law and other institutions that are needed as we move further into the digital age.”

When asked if there is a better way of establishing standards for DAOs, Simms noted that the problem does not lie with the technology but with the law.

“People are quite correctly worried about potential personal legal liability. So they are trying to hack the legal system and/or legislatures are making changes to existing legal structures to accommodate DAOs (eg some states in the US amending their LLC structures.) This is not ideal and new legal forms are required,” the associate professor explained.

However, Simms argued that she does not see the sense in having a single legal structure for all DAOs. She insisted that this has been the norm with a range of other legal structures for different organizations.

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