DXdao DXdao Archive, 8 Sep 2021

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From YouTube: DAO Coverage | DXdao | WACEO Association

Description

DXdao was launched in 2019 on Ethereum mainnet. This DAO is focused on developing, growing, and governing DeFi products and protocols. Their native token, DXD, gives their holders a claim to DXdao’s revenue, as well as discounts and premium access to certain features.

In this video, WACEO explains the potential issues this DAO may face, including the risk of violating tax law, and potential non-compliance to EU GDPR regulations. DXdao’s classification as a partnership may lead to liability risks in the future, and they may also face potential issues with the upcoming EU MiCA regulations.

WACEO is a non-profit organization tasked with helping blockchain organizations be legally compliant in the ever-changing regulatory landscape.

Additionally, they help Decentralized Autonomous Organizations (DAOs) with any business-related service they might need (legal work, accounting services, business planning, etc) by connecting them with their WACEO Service Providers.

https://www.waceo.org

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DISCLAIMER: This video should not be considered legal, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine what the correct regulatory guidelines are.

A

Hi and welcome to this voicio coverage of dx thou, my name is asmo, and today I'm going to walk you through some of the regulatory and legal challenges faced by dx tao in its operations.

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um That might be interesting to consider so without further ado. Let's get started. What is dx down? Well, dx dao was launched in 2019 on the ethereum mainnet and is mainly develo engaged in developing growing and governing various d5 products and protocols.

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Current services include, for instance, omen, swapper or rails dxdao also issues its own native erc20 token, called dxd token holders have an economic claim to dx dow's revenue and may enjoy discounts or have premium access to certain features found in dxdow services.

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In contrast to other dows, though, dxd holders do not automatically gain voting rights when it comes to decision making. Instead, voting rights are held by so-called dx dial reputation holders.

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This reputation or rep in short, can be earned by making contributions to dx dao in the form of submitting proposals which are successfully agreed to by other voting members earned rep is associated with a particular stakeholder address and cannot be transferred, which is important to note.

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So, let's have a look at some of the applicable law and liability issues. As per usual, it is useful for us to recall some general principles concerning jurisdiction which might be applicable.

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The first one is the territorial principle, which essentially allows the state to exercise jurisdiction over matters occurring on its territory so fairly simple basic straightforward. Then we have the active personnel personality principle. This is the right of a state to exercise jurisdiction over their own citizen, irrespective of the territory they are in. So, for example, a german committing a crime in the us can be uh still prosecuted by german law. If allowed, then we have the passive personality principle, and that is the right of a state to exercise jurisdiction over a person harming one's citizen.

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All of these principles may apply in the context of the extent at the moment, dx dao is operating fully autonomously and its current legal status is unknown. However, it was developed by gnosis limited, which is incorporated in gibraltar. Gibraltar, on the other hand, has the status of a self-governing british overseas territory.

A

This means that it has independence tax statutes and can enact its own laws. However, any area that is not covered by gibraltar law is governed by a uk common law so, to the extent that gnosis operates within the territory of the european union, uh eu law will also apply. So you have these three laws that might be applied in summary, one could this argue that any legal claims against dx dao would potentially be directed towards the developer or violating entities persons themselves?

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In this case, one of the principles outlined above could apply as well as gibraltan, uk or eu law is mentioned.

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However, it is also possible that one member can be held liable on behalf of the entire organization in question, as there does not exist any entity onto which liability could be transferred in the case of dxdap, for instance, in the eu, all dows are considered general partnerships where the respective members are considered as partners and can thus be held jointly and fully liable on behalf of the entire organization.

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Let's have a brief look at tax law as well as dx dao is not a registered entity anywhere serious concerns regarding tax compliance can be raised here. It is unclear to what extent and where dxdow would need to pay taxes on the revenue generated and gifted products also raised some concerns with regards to taxation.

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Finally, each dxd holder should also be aware of their own tax obligations under their respective jurisdictions, for any earnings made so becoming compliant with local tax requirements will thus be one of the main issues and regulatory risks faced by dxdao and some of its members moving on with some gdpr compliance issues. So, with regards to dao's gdpr, compliance can be quite challenging following the gdpr. Both a data controller and a data processor can be held accountable for any violations of their obligations under the regulation applied in the context of dx dao.

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Essentially, any member could be regarded as a data, controller and or data processor, and thus be held liable for a breach of the gdpr, while identifying the members of the dao could be challenging once identified, members could be jointly fined up to 20 million euros for any violation, which is, of course, a huge sum.

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In summary, as with many other current legal frameworks, the gdpr is not suited to deal with dows and can carry substantial risks for dx dao if applied in its current form.

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One thing that is also to be noticed is that dxdow does not outline or describe their commitment to data protection or ensuring gdpr compliance at the moment. Next, let's have a look at the european commission's uh regulation of markets in crypto assets proposal in short mika, although there is no official timeline available. Yet it is to be expected that the european commission's regulation short mika, will most likely be implemented by 2024, while the contents of the regulations are not final. Yet that should be stressed.

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The proposal by the commission gives a good sense of what to expect with regard to the regulation of crypto assets and their service providers on an eu level due to its legislative nature. Mika will not have to be implemented into the national law of the member states and will take effect in the entire eu.

A

However, any non-eu company wishing to do business in the eu in the field of crypto assets and which does not fall under any of the exemptions listed, will have to abide by the regulation when it comes to the types of assets which dx tao is dealing with. One could make the argument that dx dao issues both utility tokens in the form of rep, as well as ascent reference tokens which would be dxd.

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In this case, however, it is unclear whether dx dao would be regarded as a crypto asset service provider- short casp, under the current proposal, as it does not seem to entirely fall within the definitions provided.

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However, the fact that dxd token holders are entitled to receive some form of dividend from the revenue created would suggest that the mika could apply essentially determining the potential applicability of mika would require a little bit more information with regards to the operations of dx dao, as well as a closer investigation of the different definitions outlined in mika.

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If dx dao were to follow the mika regulations as a casp, a number of other regulatory requirements would have to be met, for example, insurance coverage, training of staff depending on the business model, capital or internal governance structure.

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I'm so I'll go one back, um because there is still a little bit yes exactly as I already mentioned in the beginning.

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Without a legal entity that represents dx, tao members could be considered jointly liable for any legal issues at the moment, which is why dx tao has to be incredibly important to be compliant, while most members, of course, are probably still anonymous at the moment, they could be tracked in the future, and the outcomes in case of any violations could be pretty severe.

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So when joining a dao members should consider all of these legal and regulatory risks, and it is also, of course, important for these dows to implement compliance roadmaps and in order to achieve sustainable growth uh in line with legal and regulatory frameworks. This is kind of where waseo comes into the picture.

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um Waseo is essentially establishing a non-profit association which is seeking to build a network of trusted experts that can assist dows, especially compliance-seeking daos, with the regulatory challenges that are presented to them at the moment, but also the future regulatory challenges, as we saw mika, will, will be implemented in the next three years and it will have a host of requirements that daos will then have to fulfill these light audits, so will provide a basis for daos to really begin to see the risk that they face and perhaps help members to really understand the risks and and be prepared for the regulatory challenges uh of the future.

A

So that is it for uh for now. Thank you so much for your attention, um if you have any questions, feel free to get in touch with waseo we're always more than happy to help out and until the next time in this case. Thank you very much.