Business

Problems and Solutions, Part 1

Legislators in Australia want to regulate Decentralized Autonomous Organizations (DAOs). In this three-part series, Oleksii Konashevych discusses the risks of suppressing the emerging phenomenon of DAOs and possible solutions.

On March 21, 2022, during Blockchain Week Australia, Australian Senator Andrew Bragg made some interesting statements, one of which concerned the legislature’s intent to introduce regulations for decentralized autonomous organizations.

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In itself it is not new, as in October 2021 the Australian Senate Committee, led by Senator Bragg, recommended bringing decentralized autonomous organizations under the Corporations Act, which sets standards for corporate governance and personalities.

The senator’s plan

So what did Senator Andrew Bragg say?

“Decentralized autonomous organizations can replace corporations. It could be the most significant development since the first public companies went public on the Amsterdam Stock Exchange in 1602.”

He continued: “If that doesn’t make politicians listen, then maybe it will. Because DAOs are recognized as partnerships and not corporations, they are not subject to corporate income tax. Corporate taxes accounted for 17.1% of total Commonwealth government revenue. Our reliance on corporate income tax is unsustainable.” Bragg added, “DAOs are an existential threat to the tax base and urgently need to be recognized and regulated.”

You can find an expanded version of the statement on his website, in which the senator shows some economic data to support his conclusions.

It should be made clear at this point that the partners in a partnership pay taxes, but separately: Individuals pay income tax and companies in the partnership continue to pay corporate tax, just like any other normal company.

Then the senator clarifies exactly what aspects of DAOs the government plans to regulate, “acknowledging that DAOs are self-regulatory and transparent, with a built-in system of governance.”

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He continued, “The Treasury Department needs to address these issues and leave the field open for DAOs to continue living up to their name. Any attempt to dictate a code [would] be self-destructive.”

Related: Australian senators are pushing for the country to become the next crypto hub

problem

And it doesn’t sound bad, does it?

If implemented correctly, all three goals can actually be achieved: consumers are protected from malicious and unscrupulous businessmen, revenues are properly taxed, and at the same time the burgeoning industry of DAOs is not stifled.

And here’s a catch. All DAO and Fintech regulations we have seen in the world so far have taken this bureaucratic route of relying on traditional approaches and methodologies. The bureaucracy. The difference between them is only in the narrowness of the noose.

The problem is that new approaches to regulating this industry are not widely discussed in society and politics. They are not on the agenda. But these concepts exist, and I’ve spent five years of my academic research working on them.

Related: Decentralized Autonomous Organizations: Fiscal Considerations

The risk is that because these new concepts are not addressed, they are not on the agenda of politicians and bureaucrats, so when they regulate, they rely on the existing methods, something they know, and that is not good , because they only know the conventional ways of regulation. But DAOs appeared as a response to outdated approaches, excessive bureaucracy and bureaucracy.

Read Parts 2 and 3 about replacing a business register and the code is law paradigm.

The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Oleksiy Konashevich has a PhD in law, science and technology and is CEO of the Australian Institute for Digital Transformation. In his scientific work, he presented a concept for a new generation of land registries based on a blockchain. He pitched an idea of ​​Title Token and backed it with technical protocols for smart law and digital government to enable full-featured legal governance of digitized property rights. He also developed a cross-chain protocol that allows the use of multiple ledgers for a blockchain probate registry, which he submitted to the Australian Senate in 2021.