Problems and Solutions, Part 1

Lawmakers in Australia want to regulate Decentralized Autonomous Organizations (DAOs). In this three-part series, Oleksii Konashevych discusses the risks of suppressing the emerging phenomenon of DAOs and possible solutions.

On March 21, 2022, during Blockchain Week Australia, Australian Senator Andrew Bragg made some interesting statements, including legislators’ intention to introduce regulations for decentralized autonomous organizations.

It’s not new in itself, as the Australian Senate Committee led by Senator Bragg in October 2021 recommended bringing decentralized autonomous organizations under the fold of the Corporations Act, which provides standards for corporate governance and personalities.

Senator’s plan

So, what did Senator Andrew Bragg do? say

“Decentralized autonomous organizations can replace companies. It is perhaps the most important development since the first public limited liability companies entered the Amsterdam stock exchange in 1602.”

He continued: ‘If that doesn’t encourage policy makers to listen, then maybe it does. Since DAOs are recognized as partnerships and not corporations, they are not subject to corporate income tax. Corporate taxes accounted for 17.1% of total Commonwealth government revenue. Our reliance on corporate tax is unsustainable.” Bragg added: “DAOs pose an existential threat to the tax base and they need to be recognized and regulated urgently.”

An expanded version of the statement can be found on his website, where the senator provides some economic figures to support his conclusions.

At this point I need to clarify that the partners of a partnership do pay taxes, but separately: individuals pay income tax and companies in the partnership still pay the corporate tax, just like any other normal company.

Next, the senator clarifies which aspects of the DAOs, exactly, the government plans to regulate, “recognizing that DAOs are self-regulatory and transparent, with a built-in system of governance.”

He continued: “The Treasury will have to address these issues, leaving the field open for DAOs to continue to live up to their name. Any attempt to prescribe a code [would] be self-destructive.”

Related: Australian Senators Push for Country to Become the Next Crypto Hub

Problem

And it doesn’t sound bad, does it?

If implemented properly, all three objectives can be achieved: consumers will be protected from malicious and unscrupulous businessmen, revenues will be properly taxed, and at the same time, the emerging industry of DAOs will not be suppressed.

And here’s a snag. All the DAO and fintech regulations we’ve seen in the world so far have followed that bureaucratic path of relying on conventional approaches and methods. The bureaucracy. The difference between them is just about the tightness of the noose.

The problem is that new approaches to regulating this industry are not widely discussed in society and among politicians. They are not on the agenda. But these concepts exist, and I spent five years of my academic research on them.

Related: Decentralized Autonomous Organizations: Tax Considerations

The risk is that because these new concepts are not addressed, they are not on the agenda of politicians and bureaucrats, so when it comes to regulation, they will refer to the existing methods, to something that they know, and this is not good because they only know the conventional ways of regulating. But DAOs appeared as the answer to outdated approaches, excessive bureaucracy and bureaucracy.

Read about replacing a business registry and the “Code is Law” paradigm in parts 2 and 3.

The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Coin-Crypto.

Oleksii Konashevych has a Ph.D. in Law, Science and Technology, and is the CEO of the Australian Institute for Digital Transformation. In his academic research, he presented a concept of a new generation of real estate registrations based on a blockchain. He presented an idea of ​​title tokens and backed it up with technical protocols for smart laws and digital authorities to enable full legal management of digitized property rights. He also developed a cross-chain protocol that allows the use of multiple ledgers for a blockchain estate registry, which he presented to the Australian Senate in 2021.

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