Regulators propose new rules to promote decentralized organizations while addressing risks.
The Japanese government is taking steps to clarify the legal framework surrounding decentralized autonomous organizations (DAOs). The Financial Services Agency (FSA) has put forth a proposed amendment that would grant regulatory status to “Limited Company Type DAO Member Rights Tokens.”
The move aims to promote the development of DAOs by easing regulations on employee rights in tokenized LLCs that utilize DAO structure and governance. Public comments are open until March 4.
DAOs are entities that allow groups to self-govern and make decisions collectively through smart contracts and other blockchain-based tools. They have gained traction globally as a new approach to community management and coordination. However, the lack of clear regulations in most countries has hindered their smooth adoption.
In Japan, the Liberal Democratic Party’s Digital Society Promotion Headquarters and web3 project team held a “DAO Rulemaking Hackathon” late last year to gather feedback from companies and investors interested in utilizing DAOs. Over 100 issues were raised regarding legal, tax, accounting and other challenges.
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