The Republic of the Marshall Islands (RMI), an independent island country adjacent to the Equator in the Pacific Ocean, passed the Decentralized Autonomous Organizations Act of 2020, recognizing DAOs as limited liability companies (LLCs).
According to an announcement, the law would apply to both for-profit and non-profit DAOs registered in the country, allowing organizations to function as legal entities that can formally adopt DAO structures and governance tools.
“We believe that our island nation is well-suited based on our history of shipping registration and compliance to take this step forward and offer DAOs a place to domicile easily, efficiently, and in a cost-effective manner,” said RMI Finance Minister Bransen Wase.
Following the collapse of crypto exchange FTX, governments around the world have put forward new legislation, having beefed up enforcement from financial institutions.
The government of the island country believes that a ‘one-size-fits-all’ approach might not be the most effective way to operate in the sector. It recognizes the benefits that DAOs bring to the economy and hopes the new law will proliferate the adoption of decentralized entities and their accompanying elements.
“DAOs present an enormous opportunity for people to organize in a more efficient and less hierarchical manner. We in the Marshall Islands recognize this unique moment to lead in this critical space,” said Bobby Muller, former RMI Chief Secretary and President and Co-Founder of MIDAO.
The new legislation aims to attract DAOs and Web3 innovators by implementing a registry process facilitated by MIDAO, a local company with the expertise to set up legal entities.
Additionally, the government will create an investment fund to promote education and training on DAOs and their integration into the economy.
In Feb. 2022, the Marshall Islands formally established DAOs as legal entities. However, this law recognizes entities as DAO LLCs and their accompanying elements, such as governance, framework, voting processes, and tokenization.