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In April 2023, the Registration Authority (RA) of the Abu Dhabi Global Market (ADGM) issued a consultation on its proposed legislative framework for the foundations of distributed ledger technology (DLT). It aims to amend the existing 2017 Foundations Regulations and specifically addresses where DLT projects use Decentralized Autonomous Organizations (DAOs).
According to ADGM: “Legal subjectivity, to some extent, undermines the decentralization underlying DAOs, and some DAOs are structured as unincorporated organizations without legal subjectivity.
“This is probably the ‘purest’ form of a DAO because the DAO will consist solely of a collection of smart contracts with no external owner or governance. Nevertheless, from a legal, regulatory and practical operational perspective, the existence of entities with legal personality within the DAO structure is beneficial. The RA, therefore, proposes that DLT foundations be given legal personality.”
Mondaq notes that the ADGM’s consultation document addresses these challenges by proposing a new legislative framework, which includes several key features:
- “Creating a Standalone DLT Core Framework.
- Providing separate legal personality to DLT foundations.
- Allowing DLT Foundations to engage in any activity that is not illegal or contrary to public policy.
- It covers governance, tokens, token holder voting, reporting, disclosure, beneficial ownership, oversight and liquidation.”
ADGM’s approach to provide DAO-friendly laws is a further step that advances the UAE as a leading crypto hub.
Regulatory Financial Services EMEA
