Utah DAO Act Grants Legal Recognition To DAO In The USA

March 7, 2023

Utah DAO Act Grants Legal Recognition To DAO In The USA

The Utah State Legislature recently passed HB 357, Utah DAO Act in the country which now grants DAO (Decentralized Autonomous Organization) a legal status and limited liability protection. This act was approved on March 1, 2023, after it passed through Senate and House Committees.

This new law is a legal framework for DAO defining them as “Utah LLDs”. The law is the result of combined efforts of the Digital Innovation Taskforce and the Utah Blockchain Legislature. The law defines the ownership of DAO and protects their complaint anonymity through laws. The Quality Assurance DAO protocols are also introduced in the act which aims to set clear nuances about tax treatment and updated DAO functionalities.

Moreover, the DAO law aims to huge flexibility for innovation and recognize DAO as transnational entities. The law also seeks to provide protection by facilitating manual reporting processes. However, Utah Blockchain Legislature was concerned about the anonymity and unaccountability of DAOs, which was later addressed through the compromise where DAOs are required to divulge an incorporator while staying anonymous.

The original tax languages of the DAO were first discovered to be incompatible with both federal and state tax frameworks. Thus, the Utah Tax Commissioner’s Office suggested DAO-compliant tax wording. However, by delaying the bill’s adoption until 2024, lawmakers would have more time to adjust how the legislation is actually put into practice. Alongside this, the problem with the Utah Division of Companies’ lack of ramp-up time for managing additional applications was also resolved.

The Government of the Marshall Islands had already recognized the possibilities of DAO. Hence, analogous legislation that identifies it as a Limited Liability Company (LLC) and grants it legal standing was approved.

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