Wyoming First Approved Legal Status for DAO

Wyoming has become the first U.S. state to approve legal status for a decentralized autonomous organization (DAO), the American CryptoFed DAO, according to a statement released on Sunday. The organization, which has a mission to introduce a new monetary system, now becomes the first legally recognized DAO in the U.S.

The event followed after Wyoming legislators voted in March to pass a law allowing for the official registration of DAOs in the state. The law grants these entities, which are governed by smart contracts and lack the hierarchical control structure present in traditional corporations, the same rights as limited liability companies. The law came into effect on July 1, 2021.

The law facilitates and reduces the cost of establishing a DAO and legitimizes many cryptocurrency projects, stated Aaron Wright, a professor at Cardozo Law School in New York and founder of the DAO, back in March. It allows DAOs to form limited liability companies (LLCs) under certain conditions with a revolutionary concept in the legal world, where it is considered that every organization is governed by at least one individual.

The DAO law also solidifies Wyoming’s reputation as the most crypto-friendly U.S. state. Last year, Wyoming was the first state in the U.S. to issue a state charter for crypto banks, and has already licensed two: Kraken and Avanti.

– Wyoming is the leading jurisdiction for digital assets in the U.S., and now, with this DAO law, it is undoubtedly the highest blockchain jurisdiction in the world – stated Marian Orr, executive director of the American CryptoFed DAO, in a press release.

Orr, who is also the mayor of Cheyenne, said that over time her role as executive director will become obsolete, as decisions will be made based on the votes of DAO governance token holders.

The DAO states that its mission is to create a new monetary system with free trading, through its native algorithmic stable token, Ducat. With its legal status now secured, the creation of a true digital currency with mass acceptance is now possible, Orr said.

Ducat, and CryptoFed’s governance token, Locke, will be issued in accordance with the definitions of tokens in the Safe Harbor Proposal 2.0, presented by SEC Commissioner Hester Pierce, according to the American CryptoFed DAO.

The proposal suggests a three-year grace period before developers become subject to existing securities laws. This would allow additional time for the project to form, develop, and become ‘sufficiently decentralized’ in the same way that former SEC director William Hinman described Ethereum in the rationale that the asset is not considered a security.

However, to achieve the scalability and security that the team required, CryptoFed was built on the EOS protocol, rather than Ethereum, which is most commonly associated with DAOs.

– To leverage a business-class financial product using a blockchain with high scalability, low latency, and zero transaction fees, EOS was our choice – the team stated in their article, ‘Why We Built Our Blockchain Business on EOS Instead of Ethereum’.

The EOS-based project, which becomes the first American DAO, could prove controversial. Last year, EOS investors filed a class-action lawsuit, claiming that the blockchain was ‘highly centralized, and was not superior to other blockchains already in use.’ Last month, EOS developers paid $27 million to settle their claims.

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