A Decentralized Autonomous Organisation (DAO) is an internet-native community of people with shared interests and responsibilities. The key point about a DAO is that its rules are encoded into a smart contract that runs on a blockchain.
Some well-known examples of a DAO include Ukraine DAO, Constitution DAO, Moon DAO, The DAO, Assange DAO, etc.
Decentralized Autonomous Organizations (DAOs) have made a significant influence on our views regarding governance, decision-making, and fundraising. And as they continue to evolve, different countries around the world are beginning to recognize them as a viable business structure.
Since DAOs have the potential to be recognized as legal entities, it is vital to understand how various regulatory environments influence their operations. In this article, we will examine the differences between a Wyoming-registered DAO and a Marshall Islands DAO.
Wyoming is a state in the Mountain West sub-region of the Western United States, while the Marshall Islands is a sovereign nation. Both states recognized the Decentralized Autonomous Organization. In fact, Wyoming is one of the pioneering states to legally recognize DAOs in the US.
Wyoming DAO
Wyoming DAO is among the pioneer states in the United States to approve comprehensive blockchain legislation; thereby making it a famous destination for crypto and blockchain start-ups.
The Wyoming Senate Bill 38, named the Decentralized Autonomous Organization Supplement, provides Wyoming DAOs with protected legal status and permits them to operate as a Limited Liability Company under the Wyoming Limited Liability Act.
This bill was passed by the legislature in July 2021.
The Wyoming DAO Act serves as a legal framework for establishing and operating DAOs in the state. As a result of this, Wyoming DAOs are regarded as separate legal entities. They can venture into contracts, purchase their assets, and partake in legal proceedings.
One of the key advantages of Wyoming DAOs is the provision of a legal system. The state has a well-established legal system that offers clear guidelines for the numerous businesses operating in the state.
Another advantage of Wyoming DAOs is the region's low tax rates. This makes it an attractive location for business owners interested in minimizing tax costs.
Marshall Island DAO
In February 2022, Marshall Island passed a bill Recognizing the Decentralized Autonomous Organization into law. The Act acknowledges DAOs as distinct legal entities, thereby providing a regulatory framework for their operations.
The incorporation of DAOs in Marshall Island will enable individuals to leverage the United States' mixed legal system and that of the English common law. The DAO there is easy to set up; all you need are three founding members.
It will only take three weeks to set up the company and two weeks to receive the license; it's affordable, and overall, Marshall Island has some operations with the United States.
One of the main advantages of Marshall Islands DAOs is that it is flexible. It offers a great deal of flexibility in terms of fundraising, governance, and decision-making. This allows easy adaptation to changing market conditions.
Another advantage of Marshall Islands DAOs is the country's closeness to Asia, which houses the world's largest cryptocurrency market. This makes it an ideal location for blockchain and crypto start-ups.
The Wyoming DAOs vs. Marshall Island DAO
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As mentioned earlier, Wyoming was the first state to permit DAOs to operate as a Limited Liability Company, while the Marshall Islands did so around February 2022.
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Also, while Wyoming is subject to the United States federal law, Marshall Island is sovereign; it is not subjected to the United States laws, but it will still enjoy benefits from the United States military protection and the postal services.
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Wyoming only allows you to use the United States legal system, but Marshal Island permits you to use the United States and Great Britain legal systems.
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In Wyoming, if the DAO “failed to approve any proposals or take any actions,” the LLC would be dissolved. In Marshall Island, you only need three founding members to start the DAO. These people don't necessarily need to be legal; you can choose any person for the task.
Conclusion
Both Wyoming DAOs and Marshall Islands DAOs offer unique advantages and advantages. Wyoming assures legal certainty and reduced tax rates, while Marshall DAOs are flexible and close to Asian crypto markets.
Therefore, the choice between Wyoming DAOs and Marshall Islands DAOs depends on the needs and priorities of your DAO that wants to use either of the two existing legal wrappers.