US crypto regulation bill aims to bring greater clarity to DAOs

On June 7, United States Senators Cynthia Lummis and Kirsten Gillibrand launched the much anticipated Responsible Financial Innovation Act, proposing a comprehensive set of regulations that address some of the biggest questions facing the digital assets sector. By providing holistic guidance to the rapidly growing industry, the bill offers a bipartisan response to President Biden’s call for a whole-of-government approach to regulating crypto.

Among its many proposals, the bill establishes basic definitions, provides an exemption for digital currency transactions and harmonizes the roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), delineating regulatory swim lanes and granting a significant jurisdictional expansion to the CFTC.

The bill is perhaps most productively seen as an invitation for further dialogue. In the coming months, its success or failure will largely be determined by the strength of the debates it generates. It has already engendered strong reactions from the industry. One of the most hotly debated — and potentially impactful — sections of the legislation pertains to decentralized autonomous organizations (DAOs). While the act helpfully clarifies elements of DAO policy, further action is required to answer the remaining questions around legal status, applicable laws and jurisdictional authority.

While some assert that incorporation, for example, could foist requirements on DAOs, others argue that the bill does not mandate that all DAOs must be incorporated but instead only makes it an option for those seeking to benefit from tax opportunities. As this debate suggests, the bill’s ultimate meaning for DAOs is far from clear. Indeed, many of its implications will depend upon the outcomes of a series of review processes and votes.

Though the bill has been brought by a bipartisan pair of policymakers with seats on critical committees, including the Senate Agriculture and Banking Committees, Senators Lummis and Gillibrand have asserted that up to four Senate committees would ultimately have authority over the legislation. Even so, the bill’s very existence is laudable for its attempt to provide clarity to the emergent sector.

In a recent comment, Senator Lummis herself asserted that “[the bill] is an important step towards securing America’s financial leadership for generations to come.” By providing comprehensive guidance on digital assets, the legislation has already made progress.

For DAOs, it has begun addressing many of the questions that builders have been grappling with for years. But for the Senators’ vision to be realized, DAO policy, among other issues, will need to be wrestled with and, ultimately, meaningfully advanced. Now it is up to industry leaders, policymakers and others in the ecosystem to work together to collaboratively develop the effective fit-for-purpose policy required for this nascent organizational structure to thrive.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Aiden Slavin is the Project Lead of the World Economic Forum’s Crypto Impact and Sustainability Accelerator. At the Forum he leads initiatives across the public and private sectors to advance the Web3 policy and impact agenda. Prior to the World Economic Forum, he led policy and partnerships programs at ID2020, an alliance focused on realizing the benefits of blockchain-based digital ID. He holds a BA from Columbia University and an MSc from the University of Oxford.