MONTPELIER, Jan. 8, 2018 -- Decentralized autonomous organizations, also known as DAOs, may soon be a legally recognized form of entity in the state of Vermont.
A DAO, sometimes called a decentralized autonomous corporation (DAC), is an organization that is run through rules encoded as computer programs called smart contracts. A DAO's financial transaction record and program rules are maintained on a blockchain.
Vermont senator Alison Clarkson (D-Windsor) introduced a bill on Jan. 3 that would enable the creation of a new business structure called a digital currency limited liability company or DCLLC. If S.269 becomes law, it would allow a DCLLC to provide for its governance, “in whole or in part, through the technological architecture of the system,” which is the defining characteristic of a DAO.
Once registered as a DCLLC, the usual legal rights and protections currently afforded to traditional limited liability companies would presumably apply to a DCLLC.
According to provisions of the bill, any digital currency system may elect to be recognized as a DCLLC by specifying in its articles of organization that it is one. The bill would also impose additional registration requirements that are specific to DCLLCs. Among them would be adopting protocols to respond to system security breaches, adopting rules governing the responsible use of computing power by mining pool operators, and paying a state tax of $0.01 for every U.S. dollar equivalent of value transacted through the system at the exchange rate that prevails at the time of transaction.
The bill also includes a directive for the Vermont Agency of Commerce and Community Development in collaboration with the Department of Financial Regulation to review the e-residency program of the nation of Estonia and consider areas for adoption of comparable aspects of the program within Vermont.
Submitted by Stephen Farrington, Blockchain and Cryptocurrency Consultant