Decentralised autonomous organizations: looking for a suitable regulatory treatment

Decentralised autonomous organisations (DAOs) represent a new innovative type of investment vehicle that may fundamentally change the way business and social ventures are constructed and managed, as they offer, inter alia, enhanced supervision, auditing and democracy. Yet, there has been no legal examination of the relevant advantages and opportunities. Specifically, the legal nature of DAOs in terms of existing legal forms, such as partnerships or collective investment schemes, and the inherent risks and disadvantages of these novel digital creatures based on blockchain technology have not been explored yet. The latter include inter alia technology risk, transfer risk and cybersecurity risk. These issues could be solved or managed with the introduction of principle and standard-based safe harbour rules followed by a new convention, a Law of the Cyber Entities (Lex Corpus Cybernetica) that mirrors the eleven Principles for Business contained in the UK FCA Handbook. Such convention could be overseen by a new standard-setter organisation similar to the Basel Committee on Banking Supervision, which could include international regulatory and supervisory bodies along with regulators.