Wyoming Pioneers Legal Framework for DAOs
Wyoming Governor Mark Gordon has taken a bold step toward the future of digital innovation by signing into law a bill that establishes a comprehensive legal framework for the formation and management of decentralized autonomous organizations (DAOs).
This groundbreaking legislation, sponsored by the special committee on blockchain, financial technology, and digital innovation, introduces a legal status for decentralized unincorporated nonprofit associations (DUNAs) based in the state.
As reported earlier, Wyoming is also working on a stablecoin bill, formally referred to as the “stable token” project, and was recently looking for the director of the stable token commission.
Wyoming Brings Framework for DAOs
The newly enacted bill, effective March 7, outlines the meticulous requirements for forming a DUNA, elucidates the roles of smart contracts, and provides legal provisions governing the responsibilities of the association and its members.
One of the notable aspects of this legislation is the recognition that a DUNA is a separate legal entity from its individual members. This crucial distinction shields members from personal liability, ensuring that the DAO itself can be held accountable without implicating its constituents in case of a breach.
Legal Foundation for DAOs
The decentralized nature of DAOs, characterized by a lack of central leadership and a bottom-up decision-making process, necessitates a legal foundation. With this legal recognition, DAOs gain the ability to enter into contracts with third parties, open bank accounts, fulfill tax obligations, and meet informational reporting requirements.
Contrary to some misconceptions, the law does not restrict Wyoming-based DAOs from engaging in for-profit activities.
a16z Analysis
Venture capital firm a16z, in an analysis on March 8 that both unincorporated nonprofit associations (UNAs) and DUNAs under Wyoming law are permitted to participate in for-profit endeavors.
Miles Jennings, a16z’s general counsel, and David Kerr, principal at Cowrie LLC, highlighted that Wyoming’s legal approach supports the web3 ethos while still allowing for financial compensation to digital asset holders.
Wyoming Takes an Innovative Stance on Digital Assets
This legislation marks a significant breakthrough, as it not only pioneers a legal framework for DAOs but also promotes the state of Wyoming as a hub for digital innovation and blockchain technology. DAOs operating within Wyoming are empowered to function seamlessly in the realm of decentralized finance, social media protocols, and various other for-profit activities.
Recently, the Senate of Virginia in the United States universally agreed to approve a bill amendment proposal that now authorizes traditional banks to offer digital currency or crypto custody solutions.
