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

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