EOSIO DAO Legal in Wyoming, 49 to Go

On July 1, the American CryptoFed DAO became the first legally recognized DAO within the United States. DAOs are now considered by Wyoming to be limited liability companies that carry similar characteristics and responsibilities. The Wyoming Decentralized Autonomous Organization Supplement is certain to be the first of many crypto laws. 

About American CryptoFed DAO

The company behind American CryptoFed DAO is mSHIFT Inc. It's been a leader in mobile banking. Through the Mobile Payments Industry Workgroup, mSHIFT works with regional Federal Reserve banks to enact change.

As its name might suggest, American CryptoFed DAO it's about decentralizing monetary systems. Decrypt overviewed the project, its potential impact, and spotlighted influence makers from both the private and public sector.

THE ADVANTAGES OF EMPLOYING A DOA

Employing a DAO structure over that of a traditional limited liability company brings several powerful advantages. It directly impacts the dynamic of leadership as well as the motivation behind decision making. It's important for DAOs to have the same rights as limited liability companies. The objective is to move forward with the greatest efficiency, something that blockchain communities know quite well.

Aaron Wright added insight to what Wyoming was doing. In a past Decrypt interview, Wright pointed to how the new law also makes it more economical and easier to form a DAO.

Why EOS over Ethereum

American CryptoFed DAO, is strongly rooted in Wyoming. It's CEO, Marian Orr, was mayor of Cheyenne. Orr has taken as far a pro blockchain position as to describe future companies where CEOs are obsolete. Instead, DAO governance relies on token holder’s voting on decisions enacted by smart contracts. Here's what she had to say about Wyoming’s role:

“Wyoming is the leading digital assets jurisdiction in the USA, and now, with this DAO law, Wyoming is arguably the top blockchain jurisdiction in the world,” 

Her position on choosing EOS (from 2019) appears equally as strong:

...with high scalability, low latency and zero transaction fee, EOS was our choice. In our opinion, it is currently the best available public blockchain platform.

Regulatory Hurdles

A key battle blockchain developers initiated a few years ago was to insist upon a grace period proceeding subjugation to security laws. Not only did developers believe this necessary to avoid stifling new projects, but also, to do so would be misdirected and even unconstitutional. 

Startup blockchain projects need time to become significantly decentralized. This is the motivation behind the three-year grace period suggested in the latest version of the Token Safe Harbor Proposal. SEC Commissioner Hester Pierce seems to support it.

ABOUT THE BILL

The Wyoming Decentralized Autonomous Organization Supplement outlines the following:

  • restrictions

  • transfer details

  • managerial method

  • membership

  • voting

  • dissolution

  • other aspects

Here’s how closely the law compares a DAO to an LLC:

  • “ A decentralized autonomous organization is a limited liability company whose articles of organization contain a statement that the company is a decentralized autonomous… “

The definition section goes on to say:

  • “ This chapter does not repeal or modify any statute or rule of law that applies to a limited liability company… “

Both the Wyoming Decentralized Autonomous Organization Supplement and the DAO’s structure, may determine fiduciary duties as well as ownership transfer. For example:

  • “ The registered name ... shall include ... ‘DAO’, ‘LAO’, or ‘DAO LLC.’ “

  • “ ...define ... as either a member ... or an algorithmically managed decentralized autonomous organization… “

About forming a DAO:

  • “  Any person may form a decentralized autonomous organization which shall have one (1) or more members… “

  • “ ...The person forming the decentralized autonomous organization need not be a member of the organization. “

  • “  ...maintain in this state a registered agent… “

  • “ An algorithmically managed decentralized autonomous organization may only form under this chapter if the underlying smart contracts are able to be updated, modified or otherwise upgraded… “

Considering the global nature of blockchain technology, it’s worth noting that the secretary of state cannot issue certificates to foreign-based DAOs.

Wyoming’s Impact in Blockchain Infrastructure

This same day (July 1) the law went into effect saw the following Senate filings:

  • SF0038 - Decentralized autonomous organizations. BlockChain/Technology [04/21/2021 - 07/01/2021]

  • SF0039 - Digital identity. BlockChain/Technology [04/01/2021 - 07/01/2021]

  • SF0040 - Wyoming Money Transmitters Act-amendments. Minerals [04/01/2021 - 07/01/2021]

  • SF0041 - Tax lien enforcement-amendments. Minerals [02/08/2021 - 07/01/2021]

  • SF0042 - Out-of-state state bank charter conversions. Minerals [02/08/2021 - 07/01/2021]

  • SF0043 - Wyoming energy authority amendments. Minerals [02/08/2021 - 07/01/2021]

CONCLUDING THOUGHTS

People are no longer asking why Wyoming is crypto friendly as was the case when the state supported the licensing of crypto banks. DAOs as limited liability companies promise to change how the state, and eventually America, does business. It empowers individuals who choose to be token holders. Through smart contracts, the health of an organization is drastically more resilient. Furthermore, there now exists a real capacity to enact positive change for a better future.


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