Regulating the Decentralised Autonomous Organisation – Symposium and Network Formation

Posted on: 13 February 2024 by Dr Matthew Shillito in Blog

A one-day symposium, hosted by the School of Law and Social and Social Justice on 25 January 2024, brought together scholars across a range of legal disciplines to discuss the legal implications surrounding the usage of decentralised autonomous organisations (DAOs) and how they should be best governed.

The organisers (Matthew Shillito (University of Liverpool), John Picton (University of Manchester), Bonnie Holligan (University of Sussex) want to bring new perspectives to bear on an emerging technological area of law. The day primarily focussed on legal academic debate, but also incorporated the views of practitioners in the field.

Background to DAOs

Decentralised Autonomous Organisations, or DAOs, are like digital communities that operate on the blockchain, a secure digital ledger. What sets them apart from ordinary organisations is that they don't have a central management structure. Decisions are made by community members who use digital tokens to vote on things. Smart contracts, essentially coded rules, enforce how each DAO operates on the blockchain.

Participation in DAOs is open to anyone who owns the digital tokens. These organisations are used in decentralised finance, digital asset management, governance for both profit and non-profit entities, and content creation.

The emergence of DAOs raises important legal questions. It is unclear how they might fit into existing legal frameworks – whether they hold property on trust, what kind of legal entity they are, if their members have specific responsibilities, and how laws regarding finance, investments, and intellectual property apply to them. In essence, the legal landscape for DAOs is still unclear and evolving.

The Symposium
Professor Valsamis Mitsilegas, Dean of the School of Law & Social Justice, warmly welcomed participants to Liverpool, emphasising the significance of such events in addressing emerging areas of the law. He underscored Liverpool's renewed emphasis on technology and commercial law.

Panel One
Matt Shillito and John Picton opened the session exploring 'charities, DAOs, and the law,' highlighting the potential functions of the DAO for non-profit organisations. The presenters identified legal deficiencies in charity-related regulations which might inhibit their adoption. Peter McBurney then addressed 'how DAOs should be governed,' delving into governance theory and developing a theory of control. Concluding the session, Ioanna Patsalidou presented a paper on 'proving a safe framework for DAOs,' outlining UK regulatory options and emphasising key considerations for the development of a safe legal framework.

^{(From L – R: John Picton (University of Manchester) and Matthew Shillito (University of Liverpool).}

Panel Two
Panel two commenced with Ilias Kapsis presenting on the 'regulation of DAOs through "recentralisation"'. Ilias guided the audience through the decentralised character of DAOs, before delving into potential strategies for re-centralisation to facilitate regulatory control. Following this, Neeti Shikha presented, 'Minsky moment for DAOs: how well are we prepared for the next winter,' addressing challenges surrounding DAO insolvency. Neeti specifically examined fiduciary obligations, the sale of DAO assets in insolvency, and the treatment of tokens as property. The panel concluded with a theoretically-driven presentation by Michael Schillig on the 'Nature and Purpose of Decentralised and other Autonomous Organisations,' focussing on the decentralised nature of DAOs as purpose-centred ‘humanless’ organisations.

Panel Three
Oscar Borgogno and Edoardo Martino initiated the concluding session by delving into ‘the intricate intersection of law, economics, and technology in blockchain-organised activities’. Their presentation amalgamated both scholarly and practical perspectives. Subsequently, Deniz Karagöz steered discussion towards ‘the analysis of decentralised autonomous organisations and security token offerings’, working through diverse jurisdictional approaches. Michael P Goodyear followed, examining the realm of ‘infringing information architectures’, drawing on intellectual property law in the United States. Lastly, Andreas Karapatakis, presented 'navigating the challenges: applying the EU’s anti-money laundering regime to decentralised autonomous organisation.' He assessed the complexities of the EU regime in this context and suggested further reform steps.

Bonnie Holligan (University of Sussex) and Morgan Lewis (Brabners LLP) wrapped up the day, drawing out synergies and uniting threads. They signposted how legal academics might support the growth of DAOs by working through and explaining their regulatory implications. The offered their thoughts on the future of the network – including potentially becoming a new DAO!

The conference was jointly funded by the Society of Legal Scholars and the Charity Law and Policy Unit at Liverpool.

The full conference schedule can be seen here.