Lawyers working in decentralized finance (DeFi) are asking for a new limited liability legal entity in Australia that would represent decentralized autonomous organisations (DAO), according to the Australian Financial Review.
The Digital Law Association, representing specialists in emerging space, and Herbert Smith Freehills propose the creation of a new legal entity.
The initiative intends to allow “DAO Limited” project governors to contract with legal entities through DeFi tools, implementing blockchain technology. It will remove traditional intermediaries like banks and exchanges. Limited liability status will also prevent Australian members of DAO from their liabilities to the losses incurred by decisions made by members of the community. Currently, DAOs in Australia function as partnerships or unincorporated associations.
According to the lawyers, legalizing DAOs in Australia could make the country more attractive for global digital asset businesses. Groups of local DeFi entrepreneurs reportedly shift offshore to jurisdictions like Singapore and Germany.
The Digital Law Association (DLA) said DAO Limited structure could draw from the “DAO Model Law” Proposed by the Coalition of Automated Legal Application (COALA). It also suggested creating a new “authorization class” in the Australian Financial Services Licence (AFSL).
A DAO is a decentralized network of nodes organized through blockchain code. It may include members and nodes from around the world. Using blockchain voting structure, DAOs involve a community of “Token holders” and allocate various rights.