Cryptoeconomic Systems Lab

Granting DAOs a legal scope

Decentralized Autonomous Organizations (DAOs) are new forms of social organizations deployed in the dematerialized environment of the blockchain. Their governance is defined by computer code (smart contracts). These entities, constituted outside the law, without legal constraints, are international by nature and cannot be attached to a specific state. The international working group COALA (Coalition of Automated Legal Applications), made up of experts from the legal and technological fields, has been working for several years to define a legal framework for DAOs. The COALA DAO Model Law, which is in its consultation phase, provides a flexible legal framework that is tailored to the particular features and needs of DAOs and their future development, while providing the necessary legal certainty for DAOs and their participants. Prof. Florence Guillaume and her assistant Sven Riva are actively participating in the development of the DAO model law, dealing in particular with aspects of private international law.

Creating a regulatory framework adapted to new technological realities

The working group conducted an in-depth survey of corporate law provisions, using a principle-based approach, to identify the policy objectives as well as the principles underlying current legislations. This comparative analysis provided a better understanding of what functional and regulatory equivalences can be provided through the technological means available to DAOs to fulfill the legal requirements applicable to legal entities that may be considered analogous to DAOs. The DAO model law is based on the principles of functional and regulatory equivalence by setting out the technological features that must be met by a DAO to be considered equivalent to a company.

The DAO model law is designed as a best practice guide for DAOs and is intended to help states modernize their corporate law to accommodate the emergence of new, fully digital models of corporate organization. In states that adopt or transpose the DAO model law into their domestic legal systems, a DAO constituted in accordance with the requirements of the model law will be recognized as a legal entity. To allow for DAOs to qualify as legal entities in as many states as possible, the model law provides for a minimum level of rights and obligations that are generally recognized in most national laws relating to legal entities that may be considered analogous to DAOs.

Next step: pass the DAO model law

The consultation phase will allow the COALA working group to gather the opinions of other experts and people interested in the development of DAOs in order to improve and finalize the law. The challenge will be to convince the legislators of many states that the principles of functional and regulatory equivalence, on which the model law is based, allow to safeguard the public interests of the states while guaranteeing users of DAOs great freedom in the way they do business. As such, the DAO model law provides a legal framework fostering innovation.

Project team

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Prof. Florence Guillaume
Faculty of Law

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Sven Riva
PhD student, Faculty of Law