The following are the outputs of the captioning taken during an IGF intervention. Although it is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid, but should not be treated as an authoritative record.
>> CAROL ROACH: We'll have Dr. Morshed Mannan moderating the session. Let's give him a welcome.
Sorry, my name is Carol Roach.
>> MORSHED MANNAN: Hello, everyone. I hope you can hear me.
>> SILKE ELRIFAI: We can.
>> CAROL ROACH: We can. Speak a little louder for us, please.
>> MORSHED MANNAN: Great. Please let me know if at any point it is hard to hear what I'm saying.
As Carol mentioned, my name is Morshed, I'm a part of the coalition of automated legal applications and we are joined today by other members of COALA, including Dr. Primavera De Filippi, Silke Elrifai, as well as members of our blockchain team.
I'm also delighted to have Mr. Michael Henning with us and we hope that today we will be able to use this time to introduce you to the Model Law on decentralized autonomous organizations at a we have been working on for the past few years and that was published in 2021.
We will give you through a presentation an overview of what pain points the Model Law serves to address, how it is different from other approaches to regulating, governing DAOs and hopefully then both open the floor for discussions with the other speakers present and questions from the audience if that is possible.
Without further ado, I will first try to share my screen.
It seems it is not possible.
>> Could you allow Morshed Mannan to share his screen if possible or the tech person to do so.
>> CAROL ROACH: Give us a moment.
>> MORSHED MANNAN: Are you able to see my screen?
>> Yes. Okay.
>> We can see it.
I'm going to give the floor first to Dr. Primavera De Filippi to give an introduction to the COALA Model Law and before I go into the finer points of its content.
>> PRIMAVERA De FILIPPI: Hi, everyone. This is pretty much a law that we started a few years ago, the idea of the Model Law, it was to try to identify the various ways in which the issues surrounding the lack of legal definitive could be responded to without requiring incorporation into an existing legal jurisdiction. While there is a few initiatives that's emerged in that sense, our attempt, it was to identify the fact that some of the existing formal requirement for registration notably could potentially be resolved by technological means to the extent that the policy objective are recognized.
So the Model Law, it essentially tries to play on the notion of functional equivalent, regulatory equivalents as a way on the one hand identifying the extent to which the law could be regarded as functionally equivalent to other type of recognized legal entity such as association companies, corporations, cooperative and so forth, but then also given this functional equivalence to which extent can the technology guarantees that are provided by blockchain technology could be regarded as achieving the same transparency and the validity, so forth, and because it is something that needs to be solved, cannot be something that's resulting in one single jurisdiction, but something that needs to be recognized more at the global level, this is why we have the document.
And the primary objective of the document, it is essentially that we want to make sure that a conversation is created between laws and regulators and policymakers because there definitely needs to be more interaction between the actor and the policymaker to understand the issues that are currently encountered by non‑incorporated DAOs and the opportunity that technologies provide to explore the regulatory equivalent solutions.
So we started the process almost three years ago now. We're currently in the process of revising the DAOs Model Law and we're eager to hear back from the audience if you have any suggestion, if you have questions, but also if you want to participate and collaborate in the revision and the evolution of this law given the new developments that have happened in the last years and months.
Yes. The idea is really right now to present this Model Law and to try to collect as much feedback in order to improve it.
You are muted.
>> MORSHED MANNAN: What we're doing for the next few minutes is to give a bit more ‑‑ now that we have the idea of it, we have content of what the Model Law contains and how it is a little bit different from other approaches to creating legal entity forms for DAOs.
I'll also talk a little bit about some of the other Model Laws we looked at in the preparation for drafting this text.
As this audience may already be aware, there have been numerous Model Laws for new corporate forums such as the Organization of American States Model Act for Simplified Stock Corporations that for example is very flexible in terms of governance, removing the needs for a Board of Directors, can be initiated by a single shareholder.
We did a comparison of the content of various Model Laws and we also drew inspiration from several other conventions and instruments, including The Hague Convention on Trusts, on the recognition and enforcement of trusts, as well as the Model Law for Electronic Commerce that was drafted by UNCITRL.
We had to consider some key questions in this drafting process. If you want to have Model provisions or show key objective, principles that should be reflected in a state law. So for instance, the difference between a Model Law with Model provisions and something like UNCITRAL legislative guide, it is an idea rather than a particular provision that has to be put in domestic legislation.
We also sought to strike a balance between mandatory and default rules. Rules that would have to be present in a particular national legislation for it to say it is compliant with the Model Law as well as more flexible default provisions where it would be possible to alter the provision while still being compliant with the Model Law.
Then we also considered whether to include substantive prescriptive rules or disclosure rules. Again, there are different approaches to this depending on ‑‑ depending on the particular approach that we are trying to facilitate.
As we see in contemporary, especially corporate governance discourse, there is an increased emphasis on disclosure rules for instance.
I won't go over the particular principles because those were ‑‑ two were already discussed fairly in depth already by Primavera De Filippi.
I'll mention for this particular audience, the idea of functional equivalence and regulatory equivalence, it is unfamiliar, it is the idea that functional equivalence allows the establishment of the equivalence between an object that's already within the realm of legal rule and another object that's not encompassed by it.
So we think of the functional equivalence between a wet signature and electronic signatures and.
Regulatory equivalence relies on the same technique but identifies the objective or the purpose of any given regulation as a goal. It allows tore the establishment of equivalence between the function of a legal rule and the function of a technology.
One example of regulatory equivalence, it is between registration requirements for the deployment of the decentralized autonomous organization on a per maliciously blockchain.
In our view, the deployment of a smart contract in a blockchain with relevant data about a DAOs is not functionally equivalent to a registration in a corporate registry. The policy objectives of publicity that we have when registering a company, those publicity requirements are met in this process and achieved. So our Model Law applies a principles‑based approach to identify the policy objectives and principles underlying provisions of corporate law in major jurisdictions.
It seeks to implement these objectives and principles by limiting DAOs that meet specific technical, governance standards and by providing rules that recognize that these DAOs technological features offer satisfactory protections and meet purposes in a manner that's equivalent to existing law.
So it provides a minimal level of rights, duties, protections that is generally recognized in legislation of corporate entities and it tries to address as we discussed in the commentary vertical agency problems between, you know, the principle agent problem, trying to deal with problems between majority and minority principles and it also tries to deal with the firm and stakeholder agency problem.
The goal is then to ultimately achieve traditional objectives of corporate law by relying on technological mean where is possible.
So Article 1 and Chapter 1 in general sets out the range of economic and social activities that DAOs can engage in. The Rights and obligations that DAOs can enjoy as a separate legal person and has important definitions that the Model Law uses.
So Article 1 for instance suggests that a DAOs is a legal entity that can be used for a wide range of activities. Some activities that haven't been in some cases explored yet, but we want to keep it open so that it is able to encompass future activities of DAOs beyond the centralized finance and certain types of service work.
Article 2 bestows legal personality to DAOs that fall within the scope of the Model Law and suggests that DAOs' liabilities are met by all of their assets. This is for us quite important because one of the goals we seek to achieve substantively, it is for unregistered DAOs to be able to access limited liability.
So we were very concerned in trying to meet the potential concerns of policymakers about how limited liability and legal personality would not be abused.
So, you know, especially given recent events, this is even more often an important point. We included at the very outset the need for DAOs' liabilities to be met.
Article 3 then provides very important definitions. I won't go through all of them because we do not have the time to do so.
I think we have to mention some of them, one of them that's very important, it is the definition of DAOs itself, DAOs refers to smart contracts, I think many of you who are in the room on Zoom or in person are already familiar with smart contracts, what they are. It refers to smart contracts deployed on a public permissionless blockchain which implements specific decision‑making or governance rules enabling a multiplicity of actors to coordinate themselves in a decentralized fashion. These governance rules must be technically although not necessarily operationally decentralized.
Here, the reason why for instance we placed emphasis on public permissionless blockchain is not only to emphasize the fact that we are only interested in a particular type of blockchain, but also to emphasize that we are interested in DAOs that are at least technically decentralized while conceding that there are DAOs who may fit within this definition that are not necessarily operationally decentralized.
The emphasis is very much on technical decentralization, although of course we hope that there are operational governance, it will also be decentralized.
Then going to a formation requirement, this is really like the heart of the Model Law because by meeting the requirements that we argue that an unregistered DAO would be able to gain the benefit of for instance legal personality, limited liability, so on.
So to be granted legal personality, a DAO must fulfill the 9 requirement, involving deployment on ‑‑ I saw the comments in the chat.
It has to be deployed in a permissionless blockchain of course as the definition requires. There is a necessity to provide a unique public address, and so this as you see, coming back to the points about regulatory equivalence, they are just like a corporation would require a unique postal address where it can be contacted, here we try to create the equivalent of this by providing a unique public address. The software code has to be posted open‑source in a public forum and again we're trying, for instance, to meet policy concerns about transparency and, you know, openness by having this software code as a requirement be posted in a public forum that's accessible to anyone, to look at, to audit, and that leads to the fourth criteria, where there has to be a quality assurance audit too often, you know, by hiring a third‑party that's able to do this to see if the code that is being used by the DAO is able to do what it says it does, to see if it is vulnerable, to hacks for instance, and then fifthly, it should have at least one user interface that can be reading key variables so, that someone outside would be able to learn certain key information about the DAO in a user friendly manner.
By definition, the governance system, at least technically should be decentralized and there should be comprehensible bylaws that are not just, you know, somehow baked into the code in this idea of trying to achieve COALA law but should have a normal set of bylaws that are comprehensible to any human being able to read the language of the law. That's available online, available to read. So that they need international about the operational governance of the DAO and like a provision of the unique public address, there is also the need to appoint a contact for the DAO and again, this meets this particular policy objective of being reachable. For instance, if we're thinking of a reason why the contact services are available, it is for servicing service of legal documents so that's again one of the reasons why we felt that there needs to be a point of contact.
Finally, there needs to be a dispute Resolution mechanism that is open for those who are part of the DAO to be able to access so that any particular dispute that isn't addressable can be addressed exposed. As we'll sort of try to point out you can see no criteria requires registration in a business registry or a corporate registry. This is a key difference between our approach and the approach taken in a lot of U.S. states and in other jurisdictions outside of the U.S. where they basically try to create a limited liability corporate structure, a DAO ICC or a limited company, you have to use that, register that. Our approach is different in the sense that there is no registration requirement but instead takes the principles‑based approach to address a lot of the policy concerns that are usually met.
I will continue moving on. We then move on to an important provision ever the Model Law which is about limited liability.
Like in many sort of traditional corporate law statutes, corporate law statutes, we have a provision of limited liability and the language is quite similar, member also not be held liable for any obligations incurred by the DAO beyond their contributions. However, members are responsible in tort for their own wrongful act or omission but not personally liable for the wrongful act or omission of any other DAO.
This was a really heated discussion that we had to understand in what circumstances would there be exceptions or sort of derogations of limited liability, because of the fact that we recognize not all harms are captured through contractual means, for instance through tort, torts committed by the DAO or a person acting lawfully on behalf of the DAO. We felt that because of this, it is important to deal with how do we, you know, allocate responsibility in those cases.
So we in this case say that if there is a tort, you know, this member who is responsible for the tort will be responsible for themselves. That will be separated from the liability of the DAO.
Then the other aspect of this, of course, it is that if another DAO has a type of interest with let's say the DAO that we are concerned with, they will not be responsible for the wrongful acts or omissions that are committed by any other DAOs either. This is again a way of trying to shield the DAO from liabilities both internally but also externally.
The third aspect of this, is to deal with a question that's becoming increasingly important now, where because of the distributed nature of DAOs, there is a concern of DAOs not complying with enforceable judgments.
Although the compromise that we came up with, it is that those members who voted against complying with the judgment that's been given against a DAO is liable for any monetary payments that were ordered within the judgment in proportion to their share of governance rights in the DAO. Here the allocation of blame is of course going to those who have greater voting power, sort of like the idea of majority shareholder or a particular person who has more influence within an organization being more responsible if they decide to not comply with the legal judgment.
There may be concerns, you know, regarding the abuse of limited liability, there was when limited liability was granted to corporations too, and we think this may be addressed by DAOs introducing a requirement for members to make a financial contribution to a reserve fund or towards the premiums of an appropriate insurance policy so as to access this benefit of limited liability.
We leave this open. The solutions that are being developed to try to deal with this are constantly evolving. This is mentioned in the commentary.
As you notice, there is a sort of an option in Article 5 (3) this is meant to mitigate the risk of abuse of limited liability by members and it tries to ensure that members will not try simply refuse to pay judgment against a DAO.
So Article 6 to 15 seeks to allow DAOs to have as much flexibility in how they internally organize while seeking to ensure that members are aware of their rights or the lack of rights and protections.
This is because Chapter 4 of the Model Law deals with the question of how a DAO under the Model Law is to be governed. It is sort of a capture that's common, again in, all corporate law, cooperative law statutes, and it seeks to allow DAOs to have flexibility in how their internal organization and procedures take place. For instance, it doesn't mandate or require in‑person physical meetings at all, even though that's, of course, possible. The Model Law enables management by consensus as well as the appointment of administrators.
So one very important provision here, that I'll mention, it is about legal representatives, and another one, it is about fiduciary status.
The Model Law recognizes that the DAO may mean representation of a chain for certain purposes and activities. Not all transactions that a DAO will undertake will just be within the blockchain network or with those who are part of the so‑called crypto economy.
While this chapter provide, it is a procedure for appointing a legal representative with narrowly defined powers that can interact with territorially bound national jurisdictions. Imagine a DAO that's unregistered that's seeking to rent commercial real estate or is trying to hire a person to do something and that person has nothing to do with blockchain altogether.
In the spirit of contractual freedom, DAOs are permitted to appoint fiduciaries if they wish, but what we try to make clear, it is that just by holding a particular position with a particular title, having a limited amount of discretionary decision making power, that should not in itself imply fiduciary status. This is seen as being a complement to the provision of being a legal representative. Just because someone is appointed as a legal representative, we are not, you know, giving them the sort of discretionary power that a fiduciary usually has.
The reason for this, it is because DAOs may often appoint a person just for a very limited purpose, and that purpose ‑‑ that person is not able to do anything beyond that limited purpose.
To classify them as fiduciary would be unjust and unfair on that person and lead to all sorts of unpleasant legal consequences for them.
So while Article 14 talks about how a legal representative can be appointed, gives, you know, the person the opportunity to be a fiduciary if the DAO wants it, Article 15 says there should be no implicit fiduciary status conferred on a DAO member just because of their title that they have.
Article 16, which is part of Chapter 5 provides that by default, you know, what will happen if a DAO has to, you know, undergo a particular change in its technical features. So Chapter 5 recognizes that DAOs have technical features that raise new questions that are not, you know, encountered by a normal company or cooperative or partnership. These technical features raise new questions that merits specific treatment. This chapter therefore includes specific Articles that concern the consequences of con tension forces, migrations and upgrades and modifications off of a blockchain network and how this can affect the legal personality of a DAO and the claims and assets that are on the DAO.
Article 16 provides that after a hard fork, the majority chain will continue to have the off‑chain assets of the DAO and Article 17 provides requirements for a DAO to retain benefits under the Model Law following migrations, upgrades and modifications.
Then Article 18 deals with another very important aspect of DAOs, especially those familiar with DAOs, you know there is the risk of there being what we call a failure event and there if what happens to the limited liability, the legal personality that we're conferring to these unregistered DAOs.
So these technical failure events are again, you know, particular to DAOs and what we argue, it is that even in the event of a technical failure, in general, legal personality, unlimited liability should be maintained but the liability of persons who are grossly negligent or acting and manifests bad faith in activating a decision. In those cases, there can be the opportunity for, you know, limited liability, not protecting those individuals.
Again, you can see how in crafting the Model Law we were trying to o deal with various situations in which limited liability protection is typically weakened and the veil is lifted in normal corporate law and trying to draft equivalence of this within the Model Law itself.
Moving on to Article 19, it is part of Chapter 6, this is the final part of the Model Law and it includes two important miscellaneous provisions necessary in creating a coherently complete legal framework for DAOs. It specifies when general business organization law should be applied to DAOs by a jurisdiction that adopts the Model Law. We have tried to create a framework through the Model Law that is able to capture a lot of different events and eventualities that may happen as well as provide reference to the internal bylaws of the DAO so as to capture as many eventualities as possible, but of course there will be aspects and issues that are not accounted for in the Model Law and then you have to refer to a general body of law as, you know, a reference for what principle also be applied, what remedies will be used.
So there we specify, you know, when general business organization laws should be applied.
For instance, this can be based on the jurisdiction, it can be the laws about LOPs, LLC, even cooperatives, in some cases it can be about certain types of partnership. It depends on the jurisdiction in question. What we tried to clarify, only the CAUNAE in the bylaws and the Model Law should be filled by domestic general business organization law and if there is ambiguity, it should be resolved in a man that are upholds the objectives and the letter of the Model Law. This is because we want to avoid the situation where jurisdictions try to impose general principles from let's say corporate raw on to DAOs even when not fit for purpose.
Finally, with respect to Article 20, it establishes the recognition of DAOs as a pass‑through entity for tax purposes such as to simplify the taxation for the DAOs that are non‑territorial and transnational by their nature and making members and participants responsible for tax compliance so they become individually responsible. This is a provision that we would really appreciate feedback on. This is something that we included based on our knowledge of the time but we're really trying to develop our provisions and thoughts on how DAOs can be taxed and how members and participants can be taxed.
If there is any comments on this from the room, whether in Zoom or in person in Addis Ababa we would really appreciate it.
We have some questions for the audience.
As I mentioned, in addition to the taxation provision, do you think these Articles are adequately drafted? Are there particular ones you think should be amended? What other Articles do you think can be included?
Finally, like an even broader question, is a Model Law still the right instrument? Do we have to seek something more normative such as a legislative guide, I mentioned the use of legislative guides in the past, or do we use something that's more prescriptive and mandatory, such as a Convention applicable to all of the states that ratify it.
Thank you very much.
>> AUDIENCE: I would like to ask a question, from the audience if possible.
Good afternoon, good morning. I'm from the chief information officer of the United Nations pension fund. I have a particular interest in blockchain. I design and implement in a blockchain solution for digital identity at the UN, and I'm also a former auditor of the UN. In response to the first question that was submitted to the audience, I wanted to share a comment vis‑a‑vis Article 3 and Article 4, specifically on Article 3 there is a definition of quality assurance. That definition makes specific reference to the fact that quality assurance is defined as the completion of professional software security audit. I emphasize the word software.
However, on Article 4 in the formation of the requirement, the first requirement is for a DAO to be deployed on a permissionless blockchain. On letter D, there is a concept that says that the software code or the DAO must have undergone quality assurance. A couple of comments here.
The first comment, it is not clear whether this software security audit first and foremost is intended to be only preimplementation or whether instead there is a concept and expectation where an audit vis‑a‑vis the quality of the DAO is also to be expected ongoing because as we know, bugs are not necessarily always found before a system is implemented. Often time, they're found when the system is already under implementation.
The second comment, which for me, it more attention. The fact that if indeed the concept of quality assurance refers to self‑security audit, but at the same time, the requirement is for the DAO to be deployed on a permissionless blockchain so a blockchain, it is not composed only by software but also by hardware. You have different layers within a DAO, within a blockchain, and therefore if we are looking at a concept of assurance vis‑a‑vis the quality of the DAO limiting to software I think is very risky. It should be there, a more broader definition that would go beyond software and include in the scope of an audit other ‑‑ the other element that composes the blockchain.
Thank you very much.
>> SILKE ELRIFAI: I think those are really good comments. Just chiming in here.
When this was drafted, most of the people who worked on it, part of the space, I think the question on the quality of the blockchain itself didn't cross our mind to be honest and I think there is a very good point. now when we started writing this three years ago, even when two years ago, what was important for us, it must be a permissionless blockchain, so that because of the transparency requirements that can be used to achieve regulatory equivalence in the Model Law. Of course, there is permissionless blockchains that you could question the quality of the blockchain itself and therefore I think these are really good comments and they should probably be made, some amendments to that provision.
In relation to the question as to whether the audit should be ongoing or not, again, it is really a great comment. I think the requirement put in the text right now, it was that when you started out, at the beginning, you should have at least an audit or even better, to have the code formally verified. Obviously, bugs turn up more so during the process but what we identified, often a project that was hacked, bad security audits or didn't do a security audit.
Personally, I think there is an ongoing requirement again, this is not yet reflected in the Model Law, at the moment of how I read it, how it was understood in a time. Please chime in, it was a security audit that complies with industry standards at the very beginning of the DAO. However, also, if things change or if the DAO is updated, you need to have an audit again.
A super good comment. I think there should be amendments to this provision on this because also right now we had a very long discussion as to what is actually what are the industry standards and those industry standards, they're changing quite quickly in the blockchain ecosystem.
Currently, for example, it is very difficult to get contracts formally verified, only possible for very simple smart contracts and it is very, very expensive like going in the millions of dollars for the system to get a formal verification and therefore we didn't require it in the documentation. With things changing, there should be some way to adopt the commentary and to make a Model Law sensitive.
We would really appreciate some more input, especially from people outside of the ecosystem, currently, the Model Law, it is theorem focused or has a lot of under tones related to the theorem ecosystem that make it is not entirely suitable also for the other blockchains and I agree that there is several permissionless blockchains where you have to worry about the quality of the work mechanism, the consensus mechanism used.
We would be happy to discuss this further with you.
>> MORSHED MANNAN: If you could share an email or something we would appreciate talking to you more about this after the event.
>> AUDIENCE: Thank you.
>> MORSHED MANNAN: I see there is a question in the chat, but I don't know which one we should go to first. Are there other questions in the room that I can't see?
>> We can take the question in the chat in relation to cyber reliability.
>> MORSHED MANNAN: The main focus was about the liability of the organization.
We do deal with the liability, by talking about the judgments and enforceability of the judgment, we do end up going into some liability questions that are beyond, you know, the liability of the entity itself.
The idea, it is that we're looking at separate liability rather than, you know, liability altogether to encompass all different forms of liability that may arise. As I said, we touch upon some points about how the liability of the entity may interface with, for instance, the personal liability of an individual whose committed a tort. For the most part, it is about the organization itself.
Thank you for that question.
>> Michael Henning has a question with regard to Article 4.
>> MICHAEL HENNING: Yes, can you hear me all right? My name is Michael Henning, I'm a finance lawyer who works for the Government of Saint Helena, a small British territory off the coast of West Africa and we're currently about to start a project to implement some sort of legislation to recognize DAOs.
My specific question is with respect to Article 4 and the passive legal recognition of DAOs that are proposed by not having a need for registration.
My concern, it is with respect to the lack of certainty to the status of DAOs without having a registration mechanism and that potentially it sort of establishes a backward looking or a continuous assessment that needs to be made at any given point in time to determine whether the DAO in fact benefits from legal person hood and limited liability.
I wondered if you had any comments related to that respectfully.
>> I'll hand it over to you, Morshed Mannan, Silke Elrifai or Primavera De Filippi.
>> SILKE ELRIFAI: If I may, Michael, if I may, can you just elaborate on ‑‑ if I understand it correctly, the question is because you have to do an assessment at that point in time you don't have enough legal certainty as you would have with a company that's registered, for example, in a register as limited by share, a company limited by shares.
Is that correct?
>> MICHAEL HENNING: With the typical company registry, the person with the limited liability comes in to existence usually at the point of registration. If this proposal does not include a requirement for registration, then my concern is that continuously, at any given point in time any third‑party that's interacting with a DAO needs to conduct to some degree an assessment of whether that DAO actually is fulfilling the forementioned requirements and this could be backward looking in a lot of circumstances where disputes potentially arise around contracts or interactions that have occurred months or years prior.
>> SILKE ELRIFAI: I think the current document could be slightly amended in relation to that. That's the general problem of, like, focusing on DAOs and not to have registration requirements. Basically, because what we have been arguing in the document is that because we have regulatory and partially functional equivalence but in that respect, in terms of registration, the regulatory equivalence, my suggestion on this would be that for the DAO to basically show that they do fulfill these requirements, for example, on the interface.
Through some other mechanisms and please, chime in here.
>> PRIMAVERA De FILIPPI: Yeah.
I think we have had those discussions at various moments.
You know, the idea, it is that you actually have the essence of this other type of unincorporated entity that do have legal personality and it is a problem that exists when you show that it is a unincorporated entity.
One way we had identified a possible solution for the issue you raise, it is that we could have some kind of external authority that actually certifies. A DAO, while there is no legal requirement for the DAO to incorporate in a traditional sense of incorporation because the registration on the blockchain can be gathered as being regulatory equivalent, because not everyone has probably the skill set, especially the early day, it may not be of use when one DAO qualifier doesn't qualify. You can have some kind of intersessional authority that engages in this type of work.
DAO can collect what's been certified by the entity or the other entity regulators in order do that that we considered this DAO to fulfill the requirement that is regulatory equivalent. In said of having a model in which you don't get any legal personality unless you are incorporated, we have a model where there is a legal personal entity that can emerge under certain conditions and to create more certainty on whether or not it exist, then we have the third‑party of the regulatory authority that can ‑‑ that has a task of actually doing ongoing verification that it is still the case and issuing budgets so that when I interact with the DAO, do I choose do I want to take the risk, maybe I couldn't get it to budge but I can do the assessment on my own and therefore I'm more likely to be in a legal uncertain zone. I request the DAO if I want to make a million dollars interaction with it, I request the DAO to get a certification from one trusted authority before I engage in a transaction.
>> SILKE ELRIFAI: The good thing is you don't have to and the law doesn't prescribe it, it is an option but it is not the requirement for having that status.
>> PRIMAVERA De FILIPPI: The idea is that over time there will probably be more standardized system like DAO factories which do fulfill the requirements by design and, therefore, it becomes easier, like I know it is one of the DAOs that's been stemming from this particular factory, therefore, I have a stronger confidence that it qualifies and then it will require more of a security need and basically, the idea, it is that the ecosystem, the industry, it most likely can figure things out in order to reduce the legal certainty.
What we consider, it is that it is important that we don't require registration especially because requiring registration by definition requires that the DAO does incorporate in a way as opposed to maintaining its status of being something that's transnational.
>> SILKE ELRIFAI: Does that answer your question, Michael?
>> Would you like to give us final words, wrap up, things that you would want the audience to contact you on or to give you feedback on? Earlier I showed the website. There is a feedback form on the website (Carol Roach) the team really wants you to provide information to them.
Just before we closeout again, I will show the website and the email contacts.
Any more questions from the audience? No, I don't think so.
>> There is one more question on insolvency by Michael.
>> MICHAEL HENNING: I had a general question on insolvency. I know you mentioned that it hasn't been looked at in too much detail and in the current Model Law. Is there a general proposal on how to handle insolvency going forward certainly from a jurisdictional perspective, a big concern is we simply don't have the resources or expertise to go with the cutting edge aspects going into a insolvency of a do we legally recognized.
I wondered if there was a general approach that's been discussed.
>> SILKE ELRIFAI: The insolvency detail has not been looked at, there is not a common approach found for this. We have looked at the DAO to change the current Model Law and two of the provisions at the moment that we from our side identified as needing update in addition to what was said right now and a few others, especially the tax provision and seeing the insolvency in the crypto spaces right now and we have not found a common ground on the insolvency provisions yet but we hope to work on this in the coming months.
>> MAZUBA HAANYAMA: If I may add a couple of points to this, in addition to what was said about the accreditation authorities, we see precedence for this when it comes to non‑profits for instance.
You would have a body, for instance, a charity commissioner, an equivalent who on a yearly basis, at least in some cases, a yearly basis, in some way audits if a charity is a charity or not, meeting its purpose, undertaking all of the obligations that it signed up to when it formed the charity or is benefiting from a particular type of charitable status.
So there is that example to look at as inspiration.
There is also I think the example that we're seeing of accreditation authorities being used widely outside of even the blockchain space when it comes to corporations in general, whether it is you are talking about the development of B corps all the way to the different sorts of environmental, other sorts of labels that are used and constantly being adapted and companies are, you know, being listed and delisted based on how they comply and there is a private sector approach to dealing with this too.
I think coming to the topic of insolvency, I will just mention a topic we discussed extensively a few years ago when drafting the Model Law and is now perhaps something that we will be able to bring back in the version 2.0 of the Model Law, it is about recognition and restructuring.
So far we focused on just, you know, the technical failure events, what happens then, and we decided to leave out what does it mean to liquidate a DAO and restructure a DAO.
I think because of the work understanding the digital assets, understanding the jurisdictional questions about the digital assets because of more people who are familiar with private international law engaging with these questions, as well as the fact that the law Commission in the user‑centric mentioned this issue of insolvency with respect to digital DAOs, we're at an opportunity moment it seems to come back to this question that that state is very recent and to also try to shape this conversation too.
You know, I was asked to give closing remarks and I would say that we are at this moment in time where there is a lot of interests now by policymakers as well in how the future of DAOs involve and especially unregistered DAOs.
I think that the Model Law, it is like a living document and one that is still open to amendment and I really hope after hear being the formation requirement, the governance requirement, et cetera, et cetera, the audience here, you know, leaves with the impression that, you know, there has been a lot of thought put into this and there is still something that you can contribute.
If you have the time, the interest, please use our contact form that was just shared by Carol to get in touch with us so that we can have a role in shaping this conversation about DAOs not only in places like the user‑centric where this has been openly, publicly announced as a priority that they want to look at, but also in other parts of the world too.
We are particularly interested as Silke Elrifai had mentioned about issues about taxation and insolvency and also very interested in thinking of how the use of, you know, experimental law making, regulatory sandboxes can be used for the benefit of DAOs. If you have, general secretariat, comments that are particular to this, please share it with us.
Finally, something that we didn't discuss but one of the participants today mentioned, if you have particular comments that are about the wider permissionless ecosystem that you think should be addressed, is insufficiently addressed in the Model Law, please let us know about this as well. Our details are made available on the slide as you can see.
>> VASHTI MAHARAJ: I don't know whether Silke Elrifai or Primavera De Filippi has any questions or closing comments before we close off today's session.
>> SILKE ELRIFAI: I don't. I would really love to have more people contribute as Morshed Mannan had already said, especially on the tax and insolvency aspects which I'm working on right now with teams and we're constituting a team on this.
Please get in touch.
>> MORSHED MANNAN: I think we have this really interesting question in the chat if we have time. I'm not sure if we do we do, I'm happy to read it out and maybe somebody would like to talk about this.
>> VASHTI MAHARAJ: Go ahead.
>> MORSHED MANNAN: So Cristina Kaufman shares she's the Chair of the OECD Working Party on responsible business conduct where they discuss corporate due diligence related to sustainability at large based on the OECD guidelines for OMEs, has done due diligence on Human Rights, the environment being a consideration when drafting Article 5. Happy to discuss further bilaterally. Yeah.
Thank you for this great question. The topic on the non‑phoenix corporate impacts was not only something that that we did discuss and were trying to understand what the DAOs would encounter and understand that it is not only limited to some type of financial damage.
So one of the reasons why we brought in discussions about tort liability, it was because there could be environmental harm created and we wanted provisions to deal with this. If you feel this is something that needs to be strengthened, can be ‑‑ the language can be modified in a certain way, we would be happy to discuss this with you bilaterally.
I think this issue on environmental impact has become prominent in this space, especially as we know with the Climate Change impact of blockchain and Ethereum, it was a very strong impetus behind why the merge had happened and that's something that they themselves, Ethereum says in their publicity material about the merge. So there is clearly this interest in the non‑financial impact that this broader ecosystem has.
If there is something not only in Article 5 but perhaps also in other provisions that you think are relevant, for instance, Silke Elrifai had mentioned insolvency, we also know that insolvency provision cans have an impact also on the type of redress that, say, mass tort litigants or those who suffered or were claimants to the environmental claims can have as well. This would be a very important discussion for us to have after the event.
I think because we really try to take a disclosure based approach to a lot of our compliance and trying to meet the regulatory objectives, I think there is a lot to, you know, learn from the ‑‑ learn from your Working Party on how we can do this in a better way perhaps.
I don't know if anyone wants to add anything or you can wrap up.
>> CAROL ROACH: We need to wrap up. Thanks.
>> MORSHED MANNAN: I would like to thank everyone who joined us today both in person and in the Zoom room. I hope that you're able to note down our contact details. It is also available online.
I would like to thank you for joining us, for asking excellent questions and giving us a lot of takeaways from this event. I hope you also found it useful.
Thank you also to Silke Elrifai, Primavera De Filippi, Vashti Maharaj, Carol Roach, Michael Henning for joining us, speakers that are contributing today.
>> VASHTI MAHARAJ: Thank you, everyone.
>> CAROL ROACH: Thank you.