The UK Law Commission has concluded that Decentralized Autonomous Organizations (DAOs) do not require a separate legal entity and can be managed under current financial regulations and tax frameworks. This recommendation comes after the committee published a scoping paper, highlighting the lack of consensus on the characteristics and definitions of DAOs.
The committee pointed to the “spectrum of DAOs,” which includes pure DAOs, hybrid constructions, and digital legal entities. This diversity complicates the creation of a uniform legal framework. DAOs often adapt their activities based on local legal requirements, making a general law at this stage unfeasible.
Instead of proposing new laws, the Law Commission proposed to revise the Companies Act 2006 to facilitate the oversight of DAOs operating as limited liability companies. In addition, it was recommended to investigate non-profit DAOs and the existing anti-money laundering (AML) to ensure they are adequately covered.
The committee stressed the need for international cooperation to develop a global AML and tax framework for DAOs. This would help to standardize regulations and ensure that DAOs comply with global financial practices.
The UK Law Commission’s recommendations are aimed at integrating DAOs within existing legal structures rather than creating new, DAO-specific laws. This approach is seen as a way to support innovation while ensuring that DAOs are effectively regulated.
