Hey guys, welcome to the Just Out podcast,
the podcast for people starting DAOs.
Today is a little bit of a
different episode in case
you haven't already noticed.
My name is Leo Henkels and
I'll be your host today.
A little bit more about me
is that I've been doing
business development at
MyDAO for a little over a year now.
And I also help produce the
Just Out podcast.
So bear with me.
We might have some technical
issues as we are recording live,
but I will edit this live
stream and post it to our
podcast feed at the end of
the day so everyone can listen to it.
Before I kind of dive into
our topic for today, Adam,
would you like to introduce yourself?
Sure,
so regular listeners know me as
usually the host of the podcast.
Today, I'm the guest, as you can see.
But I've been working on
myDAO for about three years.
Before that,
I was consulting for people
starting and operating DAOs.
And I got into crypto originally in 2012.
I've been researching the
space since then and
eventually got into it
professionally to work on DAOs.
Awesome, awesome.
So yeah, just again, we're recording live,
so there may be issues as usual,
but I'll try to edit them
out in the podcast feed for everybody.
So I think we should talk
about this episode that we're recording.
And I think the main topic
that we'll be touching on
is the DAO regulation that
was recently passed in the
Marshall Islands.
And we thought that there
would be no better people
to talk about it than me
and Adam as we worked on
implementing these changes
and then getting them ready
for our clients.
um so before we kind of dive
into the specifics of the
dow regulation and talk
about what it means for
current and future clients
um adam do you want to
provide a little bit about
my dow about the marshall
islands and its
relationship with dows so
that everyone has the
appropriate context before
we kind of dive into the regulation
Yeah, sounds good.
So first of all,
a little history of the Marshall Islands.
So the Marshall Islands
became an independent
nation around the end of
the 1970s after being a German colony,
a Japanese colony and a U.S.
colony or territory during World War II.
And shortly after gaining its independence,
started a shipping registry.
And the shipping registry
has led the Marshall
Islands to become one of
the top three destinations
or jurisdictions for
shipping related companies to domicile.
So they have about 40 New
York Stock Exchange and
Nasdaq companies that are
Marshall Islands companies.
So big player in the shipping industry.
Fast forwarding to about three years ago,
I was working on building
technology for some DAOs
when I realized that a lot
of DAOs had a similar problem.
And that problem was
actually a legal problem or
really a jurisdictional and
legal entity problem,
which is to say that there
was nowhere good to incorporate.
Now,
this came up because we were offered
that one DAO I was working
on was offered a million
dollar grant from the
Moonbeam Ecosystem Fund.
And they said to accept this grant,
you have to sign the grant agreement,
which means you need a
legal entity for your DAO.
Otherwise,
you can't enter into a contract.
And so we looked around the world,
we looked at Cayman, Swiss, Panama,
Delaware,
other popular corporate
jurisdictions and came to
the realization that all of
these options would have
forced us to make certain compromises.
So, for example,
we didn't want to be forced
to have a board or any kind
of management team for our DAO.
We wanted to put power
directly in the hands of
our members or token holders.
Additionally,
we wanted to be able to have
anonymous membership.
So we wanted people to be
able to hold our token and
be a member of the company
and not to have to know
their name and address, right?
Because it's not practical
when you have so many
members who are just
holding and trading tokens
and stuff like that.
And so both of these things
were impossible with any
legal entity that was
available at the time.
So we reached out to a
senator in the Marshall
Islands and started a
conversation that led to
first some brainstorming
and eventually passing the
first law in the Marshall
Islands in late 2021.
which created a nonprofit DAO LLC,
a new type of legal entity
that's made for DAOs and Web3.
And over the past few years,
we've passed two additional
laws at the end of 2022 and
the end of 2023.
And then finally, just a couple months ago,
passed the DAO regulation,
which is what we're here
primarily to talk about today,
but we're going to put it
in the context of the
greater story and
everything going on in the
marshall islands and in
that first year so in 2022
we created mydao which
stands for marshall islands
dao mydao is a public
private partnership with
the government of the
marshall islands and it
follows the same model that
the marshall islands has
used in the shipping
industry very successfully
which is that there is one
private company that acts
as the sole registered
agent of record for all
uh in the case of the
shipping industry for all
the shipping related
companies really all
offshore companies other
than dows are registered
through this one registered
agent that's in a
partnership with the
government and so mydao
follows the same model we
are the the registered agent for
DAO LLCs that want to
register in the Marshall Islands.
So I think we'll get into a
little bit more about our
legal entity itself, the DAO LLC,
and how it works and its benefits.
But that's a little bit of
history as far as how we got here.
And maybe I'll just add one more thing,
which is we're now
approaching about 200 DAOs
that are registering in the
Marshall Islands after just
about two and a half years
of this project.
So we're seeing some really
good growth of DAOs in the
Marshall Islands.
Yeah.
And I'd also highlight that
we have at least 50 clients
that are currently
interested and have signed on with us.
So over 250 clients that we
are in talks with total in
forgetting the DAO LLC,
which is really exciting.
And just one other thing I'd
highlight is that if you
guys want to dig deeper
into the Marshall Islands,
or if you want to hear from some of the
people in the Marshall
Islands government and talk
about and hear them talk
about their thoughts on crypto.
There's a great podcast on
Balaji Srinivasan's feed,
kind of talking about the
Marshall Islands and its
relationship with crypto.
So if you're interested in
learning more about that
and some of the background there,
I'd recommend checking that out.
And I'll make sure to link
that in the show notes
after the live stream.
So, Adam,
I think one thing that I know I
always have questions about
and I think other people
might is what is regulation, right?
And how is that potentially
different than legislation?
We touched on the legislation.
But what is regulation?
How is it different from legislation?
And then in a Marshall Islands context,
how is it different from
what the Marshall Islands
has already passed in the legislation?
It's a good question.
I would say the simplest
answer is just to say that
there are kind of a couple
layers of rules or policies
that guide how a system
works in a nation or a state.
Laws are probably the base level.
You could say the base level
is the constitution of the
country or the state.
The level above that is legislation.
Usually legislation has to be passed by
the democratically elected
governing body of that
state um and may be
approved by a president or
a governor uh and so then
that legislation becomes
the the another base layer
and then regulations are
usually passed in a sense
on top of the laws on top
of the legislation and it
becomes another set of
rules that you have to
follow usually goes into a
lot more detail so if a law
maybe goes over the basic core concepts.
It's like in the case of a DAO LLC,
brings it into existence
and defines what it is, right?
And it does go,
there's a more nuance in that,
but then a regulation instead says, okay,
well,
here's the forms you have to fill
out to create one of these DAO LLCs.
And here's the process you have to follow.
The regulation even goes
into what the government
has to do and how the
government is supposed to
operate to facilitate the
Dow LLCs in the Marshall Islands.
So it's a little bit
different probably wherever you look.
And Leo,
you brought this point up with me
earlier too,
which is you could also even
look at like case law and
once there's conflicts in the courts,
than those decisions that
are made by judges.
And by the way,
this was different in different places,
right?
We have people could look
into the difference between
like common law versus
non-common law societies.
The Marshall Islands follows
the same pattern as the
United States in terms of
how its legal system is structured,
except that it's just one country.
It's not a country with a
bunch of different states
that have their own rules,
which can really simplify things.
But you could look at court cases too,
and you could argue that
that's kind of another
layer even on top of the regulations.
So you have these different
layers and you could kind
of refer to all of it as
policy in a sense,
or you could refer to it as
a legal framework or a
regulatory environment, right?
That regulatory environment
for DAOs in the Marshall Islands,
if I say that,
I'm referring to all of it.
right it's everything from
the core laws of the
marshall islands to the dow
law to the dow regulation
to eventually there will be
court cases too and people
will have to look and see
well how are the courts
acting and let me consider
how that affects you know
my perception of the policy
environment the legal
environment the regulatory
environment yeah i mean i
think it's i think that's a
good point hopefully it
helps uh clear things up
for for other people besides me because
When I'm talking to DAOs
every day as part of my job here at MyDAO,
they're always telling me
about how there's
regulation in the US and
then there's legislation
based in other jurisdictions.
And then there's all
different types of crypto
things being passed and
they're not sure what to follow.
And I think that's the
reality is that crypto
regulation legislation is
pretty ambiguous and pretty
confusing worldwide.
And something that we're
trying to do at the
Marshall Islands is simplify it.
and give someone and give
DAOs really just one way to
follow so they don't have
to pull in from different
jurisdictions to try to
figure out what to do as a
global organization.
Yeah, go ahead.
I think it's worth
mentioning that the reality
is that unfortunately, if you're a global
project a global
organization you do have to
take into account laws all
over the world you know for
example wherever you hire
someone usually it doesn't
matter what your home
jurisdiction is they may
have rules you have to
follow but you have to
follow the rules the
policies where you're
hiring the person let's say
you're raising money from
an investor you have to
follow the rules where that
person is located and where
their transaction takes
place not just where your
home jurisdiction is
So there are certain core
things that depend
primarily on your chosen jurisdiction,
especially the structure of
your legal entity.
It's like, how do you track your members?
How do you make decisions?
Are you required to have a
board or officers or other things?
And we'll get into some of
the unique elements of the
Marshall Islands Dow LLC legal entity.
But there are all kinds of
rules that you do have to follow.
Let's say you're holding an
event in Switzerland.
There might be Swiss laws
that apply to holding events there.
It doesn't matter if you're
a Marshall Islands company
or a Delaware company in that regard.
So you do, I'd say,
I don't know if it's fair to say,
unfortunately, I guess,
just because it can be
challenging and costly.
We say, unfortunately,
but that's the nature of
the world that we live in,
is that if you're operating globally,
you do have to take global
rules into account.
But it's also important to
pick the right home
jurisdiction to domicile your company.
Gotcha.
That makes sense.
Yeah.
I think that clears things up.
Awesome.
So you want to kind of zoom in into,
into like the regulation itself and,
and how that might change
some of our current processes.
I think,
I think probably the most
applicable way is how is it
changing our processes for
future customers?
And I think,
I think the most common
question that we get are
questions around the
registration process.
So you kind of want to dive
in how the regulation is
changing things there.
I mean, yeah, first of all,
one of the goals for the
regulation is to be a plain
English document that anyone can read.
Now, admittedly, as I page through it,
it is 19 pages long.
Now, several of those pages are forms.
And that's one of the nice
things about the regulation
is that you can go and see
what are the forms you're
going to have to fill out
when you're applying for a
DAO LLC in the Marshall Islands.
It does look a lot like a law.
There's a lot in there.
but but but it's generally
speaking meant to be the
document that tells you as
someone thinking about
setting up a dow llc in the
marshall islands what you
have to do what the
requirements are so you're
going to find in there very
clear-cut definitions of
things like what is a
beneficial owner who has to
do kyc so you know one of
the benefits of dow llc's
in the marshall islands is
that you have relatively
limited kyc requirements um
you know the the nice thing about
doing everything on chain if
you are a DAO that does
everything on chain is that
all that information is
publicly available.
So my DAO and the government
and law enforcement can
verify that you're not
doing anything untoward.
So they don't necessarily
need to know who all of your members are.
they can look on chain and
make sure that you're not
engaging in any criminal activity.
And so most of the members
of a DAO LLC can be anonymous,
but if you want to know who
does have to do KYC,
and I'll tell you in a second,
it's pretty straightforward,
then you can find that in the regulation.
And basically what we're talking about is,
first of all, any beneficial owners,
which is defined as anyone
with 25% or more governance
rights of voting rights in the company,
By the way,
I always say company because
that's the legal term for
what you're turning your
DAO into in a sense, right?
Or leveraging as part of
your DAOs ecosystem as
you're creating a company.
And that's the term that
applies to all different
types of companies,
whether it's corporations,
whether it's foundations,
whether it's LLCs and DAO LLCs.
So I'll say company.
I know a lot of DAOs think
of themselves as something
different and that's fine, right?
Just because you're a
company doesn't mean you
have to act like other companies do.
But anyways,
when you're forming the company,
you need anyone who has 25%
or more voting rights,
which is frankly often no one, right?
If you're already a DAO at some scale,
you may have no one who has
25% or more voting rights.
If there's no beneficial
owners in that regard,
then all managing members have to do KYC.
Now,
you don't have to have managing members.
So managing members are kind
of the equivalent of a
board or officers or directors,
but for an LLC.
And in the case of the DAO
LLC in the Marshall Islands,
you don't have to have managing members.
But if you do,
they're next in line to have
to perform KYC as the
people who generally have
the most control over the organization.
If there's no managing members either,
then we default to one
person from the DAO.
Any one person has to do KYC.
And so a lot of our DAOs
have one person who has to do KYC,
whether it's the only
beneficial owner or maybe
at the time of founding,
there's only one member involved.
And then you're going to launch the DAO,
launch a token,
and that person has to do KYC.
For many of our clients,
it's just one person.
But at the most,
it's those beneficial
owners and or managing members.
So that's one thing that's
just a lot more clear now.
You can find it in the regulation.
You know that it's going to
be enforced consistently
because it's written into
the regulation and into the
forms in the regulation.
Another example of what's in
the regulation.
So we've created a concept.
So one of the challenges with DAOs,
as people listening to this probably know,
is that sometimes it's hard
to know who to talk to at a DAO, right?
Let's say you're going to a
DAO and you're trying to
ask them a question about their DAO.
Hey, what's the answer to this?
How does this operate?
Sometimes it's tough because
these DAOs can operate in
new ways that are much more
decentralized in their social, political,
you know,
kind of corporate structure such
that there's no one
necessarily in charge of
the question that you're
asking or no one in charge
of external relations or
communications or whatever it is.
So we at my DAO and the
government needs to know
that there's someone at the
DAO we can talk to about
official matters.
Let's say your DAO gets sued.
let's say your annual
filings are overdue and
you're at risk of facing a fee, right?
Like we need to know who to
contact to inform about
these important matters.
So we've introduced a
concept called a representative agent.
So different from the registered agent,
which is myDAO,
but the representative
agent is just a person who
gives us their contact info
and says we are available
to be contacted about this DAO.
And so there's a forum for that.
It's something that DAOs are
required to keep updated,
is who's that contact
person that the government
and myDAO can get in touch with.
Another nice thing about the
regulation that maybe
applies less directly to our clients,
but we've introduced
process improvements on the
government side so that
registrations will happen faster.
And we're currently in the
middle of implementing these changes.
And so the benefits might
not be seen for another month or two,
at least the greatest benefits.
But for example,
the whole registration
process on the government
side used to be very manual.
There was a lot of literally
printed documents, right?
Bring three copies of this
document to this office and
this office brings
one of them to this other
office and one to this other office,
right?
And we were always driving
around and trying to make
sure the documents were
going to the right place.
Well,
now the whole process is taking place
digitally.
Same thing for payments, right?
On behalf of the DAO,
we would go to collect a pay slip,
bring the payslip to another office,
pay the payslip, get a receipt,
bring the receipt back in
triplicate to the other office.
And now we're going to have
all digital payments,
just normal credit cards
and stuff and checks or
checks within the next couple of months.
So there's that improvement.
Something else that goes in
the regulation is a list of
sanctions for violations.
So previously there was some
confusion as to, well,
what happens if you don't
report all of your
beneficial owners accurately?
What happens if you don't
take a step that's required
by the regulation or the law?
Well,
now it's very clear in the regulation
the fines are reasonable
compared to fines that are
levied on other companies
in other places.
and they're specific and you
know what to expect.
So those are some examples and maybe Leo,
if there's anything top of
mind for you or anything
else you want me to dig into,
you can let me know.
Yeah, I think that's a great overview.
And I think it was cool how
you touched on some of the
behind the scenes that goes
on in the Marshall Islands
and how much time we spend
working on these
applications for each of our DAO LLCs.
I think oftentimes I talk to
customers who,
I think everything's digitized,
but we are working to get
there and we are working to
make the process faster.
And I'm excited to see how
fast we can start pushing
through these DAO LLCs in
conjunction with the government.
But one thing I really did
want to zoom in on, Adam,
is the registration process.
So specifically, if I'm a new DAO LLC,
what has changed now?
what do I need to be aware
of when I'm signing up and
want to begin the
registration process with my DAO?
And I think you touched a
little bit on it with the
KYC and the representative agent form,
but there are two new forms,
the beneficial owner
information report and the
certificate of formation
has been updated.
And I'd kind of like you to touch on that
and what it means for future
clients and how ultimately
I think it will make the
future onboarding process
easier for some of these clients.
Yeah, sounds good.
And it probably sounds like
a lot when I go over it live.
We have, luckily,
a portal that Leo has built
that walks people through
the whole process step by step.
So once someone does sign up,
the whole thing, I think,
can feel a little bit more
straightforward.
But just to go through that
in a little bit of detail.
So a couple of things that are not,
we don't give examples in the regulation,
but MyDAO provides template documents for
is that every DAO needs a
certificate of formation
and an operating agreement.
And the certificate of
formation is just this
one-page template document
that states some basic
information about the company,
its registered agent,
its principal office address,
which we provide in the Marshall Islands,
although they can choose
something else if they want.
And one of the new things
we've introduced in this
regulation is that the
certificate of formation
has to include a list of
all of the smart contracts
owned or leveraged by the
DAO in certain ways.
So if you have a treasury on chain,
that has to be listed.
If you have...
a governance smart contract,
if you have a token that
tracks your membership,
those things have to be
listed in the certificate of formation.
And this goes back to the concept that,
you know,
we need to know how to observe the DAO,
right?
And this is, again,
the trade-off in exchange
for having almost complete
anonymity for most of your membership.
We just have to be able to
look at those smart
contracts and follow the
money and make sure that
You know, there's nothing bad happening.
And so that goes in the
certificate of formation
now for new DAOs.
And the operating agreement,
which we also have a new template for.
So anyone who's worked with
us before has seen our
template operating agreements.
It's one of the valuable
parts of the registration
process that we provide.
Now we have one giant template
that replaces all of the old
templates and really walks
you through all of the step by step.
Here's what the operating agreement means.
Okay, at this next step,
if you're creating a nonprofit LLC,
you need to do the following.
If you're creating a for-profit LLC,
you need to do this instead.
If you're using a token to
track your membership,
use the following paragraph
and modify it.
If you're not using a token
or using a multi-sig,
use the following paragraph.
Just throughout,
it goes through and talks about,
here's language you might
want to include in your
operating agreement.
Now,
maybe I should have started by saying
the operating agreement is
the document that defines
how your legal entity works
and therefore how it
connects to any activity
that's taking place on chain.
So a traditional operating
agreement and people may be
more familiar with the term bylaws,
which is usually used in
the case of corporations or foundations.
The operating agreement is the same thing,
but for any kind of LLC,
including a DAO LLC.
And a traditional LLC has an
operating agreement that
probably says the list of
our members is included on
Exhibit A. And then you
list the names and
addresses of all your members.
Well, with a DAO LLC,
what you can do instead is
you say the members are
tracked using the token on
this blockchain at this address.
And by holding a token,
someone is a member.
By acquiring a token,
they become a member.
By no longer holding a token,
they're no longer a member.
And now you've taken that
same corporate form that
everyone in the world is
fairly familiar with and
just made a small change,
which is instead of listing
the members on Exhibit A,
you're listing the members
in a smart contract on the blockchain.
And so throughout there's opportunities to,
you know,
you can do the same thing with
governance rather than
saying decisions shall be
made in a meeting and the
meeting shall be called at
least seven days in advance
and shall take place either
online or at our office.
And or a decision can be
made in lieu of a meeting
by email if the following
conditions are met.
Right.
Those are the kinds of
things you'd find in a
traditional bylaws or
operating agreement.
Now with the DAO LLC, you can say, oh,
decisions are made by
following the process
contained in the governance
smart contract on this
blockchain at this address.
Or you can reference
Snapshot if you use Snapshot, right?
Or any kind of cryptographic
governance protocol.
So that operating agreement
is really important.
The new template, I think,
really helps people think through...
what they might want to put in there.
I should remind people, you know, my DAO,
we're not lawyers and
nothing that we provide is legal advice.
Now we've worked with
leading lawyers from around the world,
including someone,
many of you are probably
familiar with Tatiana Cerullo,
who's a leading Marshall
Islands DAO lawyer,
has especially helped us
with a lot of our work, including,
this template.
But there's input from
lawyers all over the world,
but every case is different, right?
And that's why it's
important to hire a lawyer
if you can't afford one or
if there's anything
complicated about figuring
out your operating agreement.
So disclaimer aside,
so you've got your
certificate of formation
and your operating agreement.
Now, the next thing is these other forms.
So there's something called
a foreign investment business license,
which is required of all DAOs.
It's an old-fashioned
concept in Marshall Islands law.
that we've carried over to
the world of DAOs.
But now for the first time,
DAOs have their own form
and their own set of
requirements for the
Foreign Investment Business License.
We call it FIBL for short.
And so you can see that form
in the new regulation.
And part of that form says, also,
please attach your
Beneficial Owner
Information Report or BOIR.
The BOIR form,
which you can also find
towards the end of the regulation,
that's the form that
captures the people who are
effectively quote unquote doing KYC,
right?
That's the form where we put all that.
The applicant puts
information about those
beneficial owners or other
people that need to be listed.
And then that information
gets verified by us using a
third party KYC tool and by
the government through
their own research.
So am I forgetting anything, Leo,
or are those the four
documents that people have
to submit during their registration?
Yep.
I think you,
you touched on everything there.
And I think also an
important part is the
reason that we're so
excited about the operating
agreement and certificate of formation,
having those smart
contracts listed is it kind
of goes back to the origin
story that you talked about, right?
Where you're trying to
mirror what you're doing on
chain with what you're doing and
off-chain, right,
and when you establish your legal entity.
And so the ability to
recognize something in your
DAO also in your legal
entity is really unique and
is kind of what gets me
excited and us excited
about our legal entity and
the Marshall Islands DAO LLC.
But I think there's another part of it,
Adam,
where you can also create a fairly
simple DAO LLC,
and maybe you don't want to
reference things on chain.
And that's also possible.
And I think maybe not a lot
of our clients know that,
or some of our clients
think that you need to be a
DAO to set up a DAO LLC.
And that's not the case.
Some of our clients look
very similar to a traditional LLC.
But did you have any
thoughts on that point?
And maybe want to clarify
anything there as well?
Yeah, it's a good point.
So look, first of all,
the Dow LLC is an LLC.
It's governed by the LLC
laws of the Marshall Islands,
except where they're in
conflict with the Dow LLC laws.
And that's really beneficial
because that way you can go
anywhere in the world and
everyone can recognize, oh,
I'm looking at an LLC and it is an LLC.
The difference is that you
put a couple of sentences
in your certificate of
formation and your
operating agreement that
basically say this is a DAO LLC,
not a regular LLC in different words.
And that makes you subject
to the new DAO Act law that
we've written as amended,
as well as the new regulation,
which gives you new capabilities.
And so, for example,
a regular LLC does have to
have managing members.
A DAO LLC does not.
A regular LLC has to know
the names and addresses of
all of its members.
A DAO LLC does not.
And so you're kind of
getting the benefit of being an LLC,
but also getting the
benefit of all of the laws
and regulations that we've
written that allow you to
truly wrap your DAO.
So yeah, to your point,
going back to the origin story of my DAO,
we want to allow a DAO
or anyone who can get the
benefits from these kind of
unique treatment.
Or even if you don't want to
use the benefits today,
but maybe you like the idea
of potentially using them in the future.
Or maybe there's a tax
benefit to using this entity.
Maybe you're just five
people making investments
together and you need a
legal entity that's going
to allow you to do some
activity on-chain rather than off-chain.
Or you want to be in a
jurisdiction that is
friendly to Web3 and crypto in general.
Maybe it has nothing to do
with your corporate structure.
Maybe you want access to the
Marshall Islands regulatory
environment where you're
allowed to have a governance token.
You can have a security
token if you want to.
You can do almost anything
you want with tokens aside
from there's some things
that are still restricted,
which is you can't be basically a bank.
or a centralized exchange
and be a DAO LLC or any
kind of legal entity in the
Marshall Islands.
You can create a
decentralized protocol of
any kind that does DeFi and
other types of finance,
but you cannot be a
centralized financial service provider.
And so there could be a lot
of situations where you
want to get access to that
environment and maybe you
want to structure like a regular LLC,
but you want access to that environment.
So I think we're still
learning all the ways that
people are going to want to
use the DAO LLC.
But to your point,
you don't have to be a DAO
in the traditional sense of the word.
In fact,
I think one of the interesting
things about the term DAO
is that people still
disagree on what it means.
And usually they're not
using it as a legal term, right?
They're referring to this
new type of community oriented,
often community oriented organization,
often nonprofit,
often governing a protocol,
but not always doing any of those things.
And so, you know, for example,
you could run your organization,
like a traditional
corporation if you want to, have a CEO,
have a management team,
have all the policies, have HR, right?
Just look totally like a normal company.
Maybe you still want to create a DAO LLC,
whether you think of
yourself as a DAO or not, right?
So yeah, to your point,
there is a lot of
flexibility in terms of how
you want to use this entity.
And I do think, look, if someone says,
well, I don't like the term DAO,
that's okay.
I mean,
it has to go in your legal
documents only.
If you want to form a DAO LLC,
it's kind of like being
like a corporation.
You might not like the word corporation,
but if that's the right
legal form for you,
that's the right legal form for you.
And you don't have to use
the word corporation, right?
You could just call yourself
Microsoft and not Microsoft Corporation.
Yeah.
Yeah,
the goal is one day that everyone
will be using a DAO LLC,
whether they're involved in
crypto or not.
And hopefully that happens
sooner rather than later.
But yeah, that's- I wouldn't say that,
Leo.
I think there's a really
good use case for lots of
legal entities all over.
And there's also reasons why
you might pick one
jurisdiction over another.
So the Marshall Islands is
gonna be the right place
for a lot of projects, but not all.
DAO LLCs are gonna be the
right fit for some projects, but not all.
So I don't,
it's not the goal that
everyone's gonna use a DAO LLC.
So it's just a goal that
it's made available to, you know,
the people that are in the
circumstances where it's the right fit.
Gotcha.
Not the goal,
but it wouldn't also it
wouldn't be bad for business, would it?
That's true.
Awesome.
So, yeah,
I think I think we touched on I mean,
I can provide a quick summary,
but but I think we touched
on the registration process
and we will link the
regulation in the show
notes so people can review it.
And like Adam mentioned,
we have the arrows,
we have like an onboarding portal, right?
And it's really simple once
you start the registration
process to see in what
order do I need to complete these steps?
What forms do I need to fill out?
And so while it may be
overwhelming when you're
listening to us talk about it,
once it's in front of you,
it's pretty simple and
fairly easy to operate.
So I think we should also
touch on current customers, right?
Hopefully some current
customers are listening to
this podcast or live stream.
What do they need to know
about the regulation?
How does that impact them, Adam?
Yeah,
so maybe a little bit less because a
lot of the regulation has
to do with the application process.
But the difference is there
is a annual filing that
DAOs need to complete.
And this regulation includes
that new annual filing form.
And so if people want to
know what you're going to
have to fill out and submit in January,
because we do all of our
annual filings and annual
fees in January in the Marshall Islands,
you can go look at the
regulation and look at that
annual filing form.
And one thing you'll see is
that you have to attach the
Beneficial Owner
Information Report or the
BOIR to your annual filing form.
And so it's the same KYC
requirements now that apply
to new applicants,
apply to existing DOW LLCs,
even if it was different before.
So, by the way, generally,
these requirements are a
little bit less stringent
than what existed before.
So, for example, for many of our Dow LLCs,
and by the way,
these requirements have
changed over time because
it wasn't clear from the
law exactly who should have to do KYC.
And so at certain points in time,
and I'm not even just
talking about the Dow Act,
but it turned out when you
combine the Dow Act, the LLC Act,
the Business Corporations Act,
the Banking Acts Act,
you know other regulations
that have been passed in
the marshall islands there
was room for a lot of
subjectivity around well
who should have to do kyc
so at times all been all 25
plus voting rights holders
and all managers if and if
there are were any managers
had to do kyc now it's just
beneficial owners 25 plus
or if there are none then
all managers have to do it um
We always had the minimum of
one person when when no one
fell into either of those two categories.
But I think that's that's
the key for existing LLCs
is to now you can see what
you're going to have to
fill out in January and
it's not going to change
until the next law or
regulation gets passed.
So you can have some
consistency and knowing what to expect.
Yeah, so like at a high level,
we're trying to simplify
things for our current
clients and our future clients.
trying to create an
objective standard for everyone to follow,
which I think is now in place.
So we're not having to
reference different laws
and we're unsure about things.
And lastly, we're just expediting things.
I mean,
we talked about the technology
improvements with the government earlier,
but I think the three
things that we're focusing
on are simplification, objectivity,
and then expediting the
process in general.
So I'm excited to see where
this goes in the future.
And yeah,
I think we touched on everything
with the process, Adam.
Is there anything I might be missing?
It's a good question.
I mean, I would just say that, you know,
every situation is still different.
And, you know,
what I'd recommend is folks review, again,
review the regulation,
read the regulation.
If you have to,
especially if you're a
lawyer that deals with these DAO LLCs,
read the regulation,
let us know if you have any questions.
And just also remember that we,
my DAO is always here to
help people through the process.
So as you're going through
your onboarding portal, you know,
you can always reach out and
ask questions about how to
fill out a certain form or, you know,
whether something meets a
certain requirement and we
can help people out with that.
Awesome.
So, yeah,
I think we I think we covered the
regulation pretty in depth.
And I think we I'd like to
just talk a little bit
about some use cases we
published on our website,
on our blog section.
You can find that at
www.mito.org slash blog.
But the first one I'll talk about is pith.
And I think it's one of the
most common use cases we
see for our clients.
And that is the protocol DAO.
And
Adam can help me out if he wants,
but I often talk to a lot of DAOs,
and we talked about this a
little earlier in the live stream,
where they have a decentralized protocol.
In this case, Pith is an oracle.
And basically,
they are trying to operate
the protocol or govern the
protocol with the DAO.
And the reality is that a
lot of these protocols,
whether they be a DEX,
an Oracle,
some sort of decentralized app
on any blockchain doesn't
need to be incorporated
because they really exist
as a set of smart contracts.
But what does need to be incorporated,
and in this case,
what Pith did is they
incorporated their DAO,
which governed the protocol.
And so I think
I think with our new
regulation and the
precedent that Pith and
other DAOs have set with us,
I think the protocol DAO
emerges as one of our best
use cases and becomes a
really good example for
clients going forward in the future.
And if you think you
resemble Pith or if you're
excited about what Pith is
doing and you are a client
or you are a lawyer that's
working with these types of clients,
I encourage you to read the
blog as it's really,
really in-depth and it
really does a good job of
explaining how Pith used us.
And I just remind you that
now that we have this new regulation,
hopefully it will be even
easier for these new DAO
LLCs to incorporate and get
through the process faster
and in a simpler way.
Adam,
I think you wanted to talk about
another one of our clients as well.
Yeah.
So, you know, and Pith, by the way,
is I think the leading,
if not one of the leading
oracles on Solana,
if anyone doesn't know.
And I think one of the cool
things about the DAO LLC
legal entity is that it can
be used for a variety of purposes.
So in the Pith case,
the DAO is governing a protocol.
Let's also talk about MoonDAO,
another popular DAO that
people may have heard of.
So MoonDAO's mission,
if I'm remembering correctly or precisely,
is to help colonize the
moon and do so in a way
that's not controlled only
by giant private companies
and governments, but done in a more fair,
distributed, decentralized way.
On the way to colonizing the moon,
since that's still
something that's in
progress or maybe a little ways away,
they've been sending people into space.
and creating this amazing
community of people that
are interested in space travel,
in the moon, in colonizing space,
starting to build the
infrastructure that will be
required to eventually do
something as massive as
colonizing the moon.
So this is not an on-chain protocol.
Now they do a lot of cool stuff on-chain.
There's all kinds of
interesting on-chain stuff they're doing,
like a lot of DAOs,
but they're not governing a protocol.
This is a project that could
just as easily, well, not just as easily,
but could have chosen to
operate as a traditional
nonprofit company.
It could have been a cooperative,
could have been a charity,
could have been just a community.
They didn't have to be a DAO
because they're not
governing anything on chain per se,
but they're leveraging the
DAO structure because it's
a more compelling way of engaging people,
of raising money for a cause,
of coordinating around a
massive shared mission.
And so that's why I like to
use it as an example because
they're not governing an
on-chain protocol.
They're governing the
colonization of the moon in
the long run and everything
that has to take place in the meantime.
That's a pretty cool dichotomy.
You have an Oracle that's
working with large-scale
financial institutions,
and then you have a DAO LLC
that's trying to colonize the moon.
And so you have a complete
different use cases,
but equally awesome and equally cool.
And I think the third one
that I'll talk about is probably the most
out there from an
organizational standpoint.
It's using something we call Futarki,
which is basically a organization,
or in this case,
a DAO that's completely
governed by markets.
And it's just as confusing as it sounds.
So I encourage you to check them out.
They're called MetaDAO.
And they're probably, in my estimation,
or my perspective, the most decentralized,
autonomous,
DAO that we've incorporated.
And I know all DAOs are
decentralized or autonomous,
or as Adam mentioned earlier,
people can't even agree
what the word means.
But in the traditional sense of the word,
MetaDAO is really as close
as you can get to the ideal
standard of a DAO.
And they found our DAO LLC
to be a really good
solution for them as they
were able to do things like
mention their governance
smart contract in their
operating agreement or
mention their governance
token in their operating agreement.
and define membership in
that decentralized manner.
And so MetaDAO is probably
the DAO most excited about today.
I encourage everyone to
check out all of these DAOs.
They're all doing really,
really cool things,
and they're all using the DAO LLC.
And the last reminder is if
you want to check it out,
any of these DAOs out or do more research,
they're all available as blogs.
We have customer spotlights
of all of them as blogs on our website.
And let me also just touch
on the meta DAO case
because I think what it highlights,
what all these cases in
conjunction highlight is
you can do almost anything
you can imagine with a DAO
LLC in terms of how your
DAO is organized and structured,
its business purpose, et cetera.
And you're really limited
only by what you can put in
code or in English, which is anything,
right?
Again,
as long as you don't go against like
the specific things that are not allowed,
right?
And if you're...
You know, we could talk about again,
like centralized exchanges
and banks one day may be
actually licensable in the
Marshall Islands.
But in terms of your governance structure,
right,
you could create even like Leo's
describing a market that
ends up leading to
governance decisions that
are that are enforceable
and valid for your company, for your LLC,
for your legal entity.
Such that if you end up in
court or if some other
organization or a member wants to know,
what was the official
corporate decision on this matter?
In a traditional corporation,
you got to ask the CEO.
And if CEO can't decide,
you got to ask the board.
In Futarki with the DAO LLC,
you look at the result of
the market mechanism.
That is the company's decision.
That is the final
enforceable legal decision.
And so that's really never
been possible before.
And I mean, also compare it to, you know,
it reminds me of like,
we often compare it to the
foundation structure, right?
In a foundation,
because a lot of DAOs still
use foundations, right?
We still see a lot of people doing that.
A lot of projects use foundations.
In a foundation, a board is in charge.
Right.
And sometimes you say, well, OK, well,
we're going to have the
board sign a contract
saying that most of the
time they're going to act
in accordance with the
wishes of the token holders.
Or if it's a few Turkey,
you could say with the
wishes of the market outcome.
But that person or persons
on the board always has the
right to decide, well,
it would be illegal for me
to take this action that
the doubt voted on.
or unethical for me to take this decision.
Or we, for some reason, we're deciding,
and this is the extreme case,
but we're deciding that we're going to go,
you know,
we're going to shut down the DAO
and give the money back to ourselves,
right?
And this is like the worst
case scenario that happens sometimes.
I'm not going to name names right now, but
And it leads to all kinds of
conflict and lawsuits and stuff.
But if you want to avoid that extra step,
which makes things less autonomous,
right?
It's really the step of like, okay,
we make a decision through
whatever mechanism and now
the board decides.
Right.
Versus in a DAO LLC,
you can have that structure if you want.
You can use managers and
give them those rights,
but usually they don't.
In a DAO LLC,
normally whatever your
governance mechanism,
which is anything you can
put in code or write in
English in your operating
agreement or reference in a
smart contract is the
enforceable legal decision
of your organization.
And so whether that is, you know,
you want that because you
want full security.
direct democracy or
something in between a
traditional corporate
governance and direct democracy,
or you want Futarki or whatever,
that's all possible with the DAO LLC.
Yeah.
And I think just another
crazy thing that blows my
mind is that Futarki was a
theoretical concept
proposed by Robin Hanson
that had never been
implemented effectively.
And the person and the
people who created the DAO
wanted to implement Futarki
for the first time.
And they thought that the
DAO was the best way to do so.
So if you're not bullish on
DAOs and you're not a believer,
I think that the MetaDAO
example is a great way to
kind of conjure some belief
in DAOs because people had
tried to use this Futarki model,
this theoretical model before,
and the DAO was the only
thing that allowed them to do so.
And so I think DAOs are here
to stay and that
DAO specifically always gets
me so excited.
And I love talking about
them because I think
they're doing some really cool things.
Any other thoughts, Adam?
Anything you wanted to talk
about before we kind of
wrap things up about
anything that we touched on?
I'll just add a quick note,
which is I'm going to be at
DAO Tokyo and Fairness 2024
in Tokyo and at ETH Tokyo all next week.
That is the week of August 19th.
So if anyone's listening to
this before then and
happens to be in Japan or
is going to be there for the same events,
please let me know so we can meet up.
But no, Leo, I think this has been great.
Thank you.
awesome awesome as a
reminder um if you're if
you're interested in
reaching out please do we
have a huge um a lawyer
network that you can talk
to and i know this whole
episode has kind of been
like an ad for mydao but we
really do want to help you
um so if you're a lawyer or
if you're a dow looking to
get set up, please,
please do reach out to us.
We can add you to our lawyer
network that we're working on,
and we can put you in contact with,
whether you're a lawyer,
we can put you in contact
with a potential client,
or if you're a DAO,
we can put you in contact
with lawyers that can help you out.
Lastly,
you can find us on Farcaster at MyDAO.
You can find me on Twitter
and Farcaster at Leo Henkels.
Um,
always check out our Twitter or Twitter
for my DAOs at my doubts,
M I D A O D S. Um, and then Adam,
did you want to show some of your, uh,
socials as well?
Yeah.
Find me on Farcaster at the
thriller or Twitter is zero
X thriller because the
thriller wasn't available and, uh,
happy to chat with anyone
who wants to talk about DAOs.
Awesome.
We're always here to help.
So please do reach out if
you want to talk.
If you would consider liking
the podcast or leaving us a comment,
we'd love to.
We love our fans and we'd
love to hear from you guys.
And as a disclaimer and a reminder,
none of this was legal,
financial or tax advice.
Please consult the
respective professionals
for that type of advice.
We're not your lawyer.
We're not your
tax advisor, et cetera.
So if you have any of those questions,
we can point you to people
who can't answer them,
but we can answer them ourselves.
Lastly,
are you thinking about starting a DAO?
Just DAO it.