The European Blockchain Association has reviewed its DSAO governance model from a Pan-European legal perspective and is able to publish the initial findings.
The full potential behind the use of blockchain technologies is strongly associated with the concept of the “Decentralised Autonomous Organisation (DAO)”. DAOs enable the individual members of an organisation to interact with each other in an autonomous and automated manner without involving any central party, ultimately removing any need for a middleman as well as facilitating digitalisation and automation of processes.
Supported by blockchain technology’s core feature acting as the single source of truth between independent parties, DAOs can be automated and implemented in code through the use of smart contracts. The early advent and hype around DAOs has, however, faced severe limitations mainly due to legal and other governance considerations. The lack of a central party in a DAO setup makes it difficult to remain in compliance with the various laws applicable in the field of AML, KYC, securities or VAT regulations and additionally complicates fundamental governance questions for communities.
DSAO – A unique RegTech response by the European Blockchain Association.
In response to the unworkable, legal aspects of DAOs, the “European Blockchain Association (EBA)” has started off with the bold vision to come up with a legally-compliant alternative to the DAO model without comprising its revolutionary approach. With this in mind, the EBA has developed and implemented a novel governance model called “Decentralised Semi-Autonomous Organisation (DSAO)”. It ultimately incorporates many of the great benefits of DAOs based on blockchain technology with a legal model fitting well into the existing legal & regulatory landscape.
The EBA itself is the very first user of this new DSAO model and has been established as an “eingetragener Verein (e.V.)” or association in Germany. Compared to DAOs, the EBA’s DSAO model differs in two key ways:
- The incorporation of the DSAO as a legal entity
- The installation of a detailed set of governance processes involving the appointment of a (human) Board of Directors as well as an independent (human) appellate body to resolve disputes (Blockchain Arbitration Forum in the case of the EBA).
Like the ordinary DAOs the EBA’s DSAO utilises a cryptocurrency-based incentivisation scheme (CrowdstartCoin XSC) and a decentralised voting system leveraging blockchain strengths.
The EBA conducted a pan-European survey on the legal aspects of the DSAO model.
Having started with the bold ambition of developing a legally workable alternative to the DAO model, it was very important that the EBA assess the legal fit of the DSAO model in other European jurisdictions for the first proof of concept. Relying on a model which comes with significant legal shortcomings in other jurisdictions would not be an option since the principles behind decentralisation call for remote collaboration across the globe! For this purpose, the EBA has drafted a pan-European survey reflecting on various legal matters to take into consideration for the deployment of the DSAO model. The survey is divided into three parts:
- External representation of a DSAO
- Tokenisation of membership in a DSAO
- Exchange of value within a DSAO
During Q2 2019, the EBA was already able to obtain the first responses from various lawyers and governance specialists for several European countries including Germany, France, Italy, Lithuania, Malta, Slovakia, and Switzerland.
EBA’s key findings from the pan-European survey on the DSAO
We have summarised our initial key findings for the seven European jurisdictions in the following illustrations.
What’s next?
The EBA keeps further evaluating the legal fit of the DSAO model and is strongly committed to building collaboration models incorporating the principles of DAOs. In particular, we are also happy to assist you in case you are interested in taking the DSAO approach to the implementation stage!
Further on, we will also plan to discuss the key implications and some country highlights in the course of one of the upcoming EBA meetups.
If you want to get in touch with us, feel free to contact Kevin Leuthardt, Steward WG Governance: kevin.leuthardt@eublas.org