In the realm of technology, there's a new buzzword that's been making waves: Decentralized Autonomous
Organizations, or DAOs. In simple terms, DAOs are organizations that are not controlled by any one person
or group. Instead, they are governed by a set of rules that are encoded in software. This means that DAOs
are transparent, accountable, and democratic. You can read more about DAOs in our previous write up
[here].
DAOs can be used for a variety of purposes, such as managing digital assets, investing in projects, or even
running a business. Due to the decentralized nature of these projects, it’s been difficult to pair them with
typical legal vehicles previously available. Some jurisdictions have leaned on and utilized the ‘Foundation’
to legally wrap or incorporate these projects.
The Abu Dhabi Global Market (ADGM) has recently released new rules for DAOs called the Distributed
Ledger Technology Foundations Regulations 2023 (DLT Regulations). Other jurisdictions such as Wyoming
and the Marshall Islands gained some traction for similar vehicles in the past however, those structures
were ultimately not as popular given the lack of regulatory clarity in the relevant jurisdictions surrounding
the activities of DAOs. The ADGM DLT Regulations put ADGM at the forefront of regulating DAOs and
reinforce the region as a crypto hub
What you need to know about the DLT Foundation offering
A DLT foundation is a legal entity that can hold and manage digital assets for a specified purpose, such as
supporting a DLT network or protocol - basically, the premise is that it is using blockchain technology.
Importantly, the DLT Foundation shall not be entitled to conduct any activities for which a Financial
Services Permission is required. This means whilst tokens can be issued by the DLT Foundation per the
regulations, these can only be utility tokens (not profit generating).
At a high level:
- DLT Foundations consist of a council, guardian and token holders
- Token holders can have voting rights to approve or reject certain matters that affect the DAO
- Tokens cannot be for profit, and all profits are required to go back to the foundation without being
distributed
- Interestingly, the regulations have allowed for the scenario whereby a DLT foundation may migrate
to or from the ADGM, (subject to certain conditions and approvals).
There is also a requirement for a CSP to apply for and work with any DAO to set up in the ADGM. Banks
Legal is a registered CSP well versed in the cryptocurrency and web 3 space. Please reach out at
admin@bankslegal.com if you require assistance or further information on this new and exciting offer
ABOUT US
Founded in 2009 by the Managing Partner Nathan Banks, Banks Legal & Corporate Services is a legal and
corporate services consulting firm based in the United Arab Emirates. With over 100 years of combined
professional experience in the UAE, our lawyers harness leading international law firm experience with
extensive knowledge of the GCC legal and business landscape. Our clients are broad, encompassing a
variety of industries and sectors, and range from individuals to family offices, SME’s and reputed listed
multinationals.
Whilst specializing in all core areas of law, providing strategic commercially focused business advice, Banks
Legal& Corporate Services also provides an extensive suite of corporate services through Banks Corporate
Services. Core to our values is a strong commitment to client service and responsiveness and we pride
ourselves on quickly identifying legal issues and providing pragmatic solutions. As an entrepreneurial
minded firm, we take the time to understand client instructions from the perspective of their business in
order to add value beyond the specific scope of work.
Our dedicated multi-cultural and multi-lingual team includes civil and commercial lawyers and staff from
across the globe with international law firm experience. With our strategic presence spanning across the
region with offices in Abu Dhabi, Dubai and Ras Al Khaimah and regional co-operation arrangements with
reputable professional services firms, we are very well placed to provide clients with key support and legal
services, who do business throughout the GCC and wider Middle East & North Africa region
MPORTANT NOTE: This document is provided for information purposes only. No representations or warranties are
being given and nor is it advice that can be relied upon. The information set out herein should not be construed as
an offer, solicitation or recommendation or contract capable of acceptance and is subject to change from time to
time. Recipients of this Information must keep the information confidential.
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