Gearing the UK up for decentralised autonomous organisations (DAOs)

29 November 2022

The Law Commission has published a call for evidence on decentralised autonomous organisations (or DAOs). The Commission intends to understand how DAOs can be characterised and categorised and how the law of England and Wales might accommodate them.

DAOs are fascinating and threaten to break down the traditional structure of corporate organisations. By using technology, such as blockchain and smart contracts, they can devolve decision-making to the body politic of their network participants and potentially even automate certain aspects of their governance and administration.

This is often touted as a form of “democratisation” of the corporate landscape. But it also has the potential to bring other benefits, including the time and costs savings that could arise from freeing management up from burdensome administration.

However, DAOs have long presented a potential challenge for legal systems, which can struggle to apply existing concepts of corporate law, financial and non-financial reporting, corporate governance and taxation to decentralised entities.

To date DAOs have not been a significant part of the landscape in England and Wales. The Commission is looking to examine why this might be. The call for evidence raises fascinating questions in this respect which the UK Government and courts will need to tackle sooner or later.

For more information, you can read our in-depth piece on DAOs generally and on the Commission’s call for evidence.

The law of England and Wales provides a variety of flexible legal tools and principles that market participants can rely on to provide a high degree of legal certainty when structuring their organisational arrangements. This does not change simply because an organisational arrangement is loosely described as a DAO.