DAOs Go Legal On Marshall Islands

The Marshall Islands, where DAOs were previously recognized as legal entities, have now passed a law making DAOs limited liability companies.

Sasha Markevich

Jan 02, 2023 - 2 min read

The Marshall Islands are the first sovereign state to settle a legal registration of DAOs for regulatory and tax purposes.

In February the Marshall Islands passed an amended Non-Profit Entities Act 2021, allowing any DAO to register and begin operations in the country. MIDAO Directory Services Inc., a domestic-based organization, has been established to help DAOs register as legal entities within the Marshall Islands “by handling everything from setting up their legal entities, to providing a physical mailing address and submitting annual filings” In September MIDAO paid USD 100,000 to the Finance Minister of Marshal Islands for the purpose of “establishing and growing the regulatory framework of digital assets” in the country.

MIDAO presents the government of Marshal islands an investment for development of regulatory framework of digital assets. Source: Midao website

MIDAO website mentions three co-founders: CEO Adam Miller, with Capital Group technology sector practice, President Bobby Muller, a former government official of Marshal Islands and Legal/Compliance Officer Shah Hafizi, who worked in Blackrock and Genesis Mining before.

Now the country has passed the Decentralized Autonomous Organization Act of 2022, which legally recognizes DAOs (both profit and non-profit) as domestic limited liability companies under the existing laws.

According to MIDAO, the Act includes the following points:

Allows DAOs to incorporate under the internationally recognized LLC structure, so long as they identify as a DAO LLC;
Allows for-profit DAOs and not-for-profit DAOs to register;
Recognizes DAO governance, voting processes, and framework, including tokenization;
Creates an investment fund for the government of RMI to continue education and training around DAOs and how to integrate them further into the economy;
Provides definitions and regulations for DAO formation, agreements, and use of smart contracts.

The description of the registry process on the MIDAO website is as easy as it gets and takes around 30 days:

DAOs’ registration steps. Source: midao.org

Now the Republic of the Marshall Islands is open to blockchain-based projects that want to be legally recognized, which means that it can become a global DAOs hub.