By George Ward
The Utah State Legislature passed the DAO Act, also known as Act HB 357. The collaborative efforts of the Utah Blockchain Legislature and the Digital Innovation Taskforce led to the enactment of the new law that designates DAOs as “Utah LLDs” and grants them legal recognition and limited liability protection.
DAOs Get Legal Status
The House committees and Senate passed the Utah DAO Act earlier this month. This legislation establishes the ownership parameters of DAOs and safeguards the anonymity of DAO-compliant individuals through bylaws.
In addition, the law introduced quality assurance DAO protocols to ensure updated functionalities of DAOs and precise nuances in tax treatment. In a tweet, Joni Pirovich, a tax advisor specializing in blockchain and digital assets who collaborated with the Digital Innovation Taskforce, noted that the Utah DAO Act is a significant advancement for DAO innovation.
“The Act, which is modeled on the @coalaglobal DAO Model Law, will take effect in January 2024,” Pirovich added. Meanwhile, the DAO law aims to promote maximum flexibility for innovation, acknowledging that DAOs transcend national borders.
This law can offer technological assurances on par with the safeguards traditionally established by laws that necessitate manual reporting procedures. The Utah Blockchain Legislature had notable reservations regarding the Act, and lawmakers made concessions to facilitate its passage.
One of these concerns is related to the anonymity and lack of accountability associated with DAOs. However, the law addressed the setback through a compromise that mandates DAOs to disclose an incorporator while preserving anonymity.
Moreover, the Utah Blockchain association discovered that the original tax language utilized in the Act did not align with the current state and federal tax regulations. As a result, the Utah Tax Commissioner’s office put forth an alternative tax language compatible with existing tax laws.
US SEC Goes After Fraudulent Utah-Based Firm
Meanwhile, there was apprehension regarding the insufficient time allocated to the Utah Division of Corporations to manage new applications. To tackle this issue, the committee postponed the bill’s implementation date until 2024, allowing ample time to fine-tune and adjust the practical applications associated with the bill.
In 2022, the Republic of the Marshall Islands sanctioned analogous legislation recognizing DAOs as limited liability companies and guaranteed the formal adoption of DAO structures in Utah’s legal units.
In other news, the Securities and Exchange Commission (SEC) has charged a Utah-based company with operating a “fraudulent” cryptocurrency mining scheme worth $18 million.
The regulator brought a complaint against Green United, Wright Thurston (its founder), and Kristoffer Krohn (a contracted promoter) in a Utah District Court. According to the complaint, the company and its representatives engaged in fraudulent activity by offering securities from April 2018 to December 2022.
They did this by selling investments in $3,000 “Green nodes” and “Green Boxes” that claimed to mine the GREEN coin on the “Green network.”