Pursuant to Chris’s post on DXLegal Assessment: DXLegal Assessments, I have taken up the challenges of tackling 1) DXdao’s approach to the US and 2) DXdao’s global decentralization strategy.
- You can find the full report of DXdao’s US Legal Challenges here: DXdao’s US Legal Challenges - Google Docs
This memo aims to examine the US legal issues DXdao is currently facing regarding general partnership, tokens, and taxation. It concludes that 1) general partnership risks are less of a concern for DXdao compared to other US DAOs due to its lack of critical mass in one single US state and the risks can be further mitigated by DXdao’s global decentralization strategy and governance agreement regarding dispute settlements; 2) the risk of token offerings being viewed as security is low as the tokens are most likely to be viewed as utility tokens; 3) DXdao will be further exposed to US taxation risks once its product/services become more profitable given its close link with the US key contributors.
In view of the type and magnitude of risks at hand, it proposes two sets of actionable recommendations depending on the resources and priorities of DXdao:
- Minimal steps:
- DXlegal shall implement continuous risk monitoring and assessment with contributor squad & governance and treasury, especially in the following areas:
- Contributor residence
- product/business map: identify which products/squads are most at US legal/taxation risks
- Treasury: pay particular attention to activities that can be tied to the US.
- Long-term talent strategy and governance:
i. Global talent strategy that truly moves away from the US center:
Contributor development for Global decentralized DAO members
Sourcing and hiring of non-US persons as key contributors in particular products (esp. the most visible/profitable ones)
ii. Align treasury and governance with insurance/defense:
Insurance/claims token tied to REP
Risk assessment and voting mechanism for compensation claims/amount
2.You can find the full report of Dxdao’s Global Decentralization Strategy here:
DXdao’s Global Decentralization Strategy - Ashley - Google Docs
Considering DXdao’s purpose, vision, product offerings, and global decentralization strategy, the ranking of jurisdictional fits is (from the fittest to the least fit): Switzerland >= Cayman Islands >>> Singapore > US.
This memo proposes two approaches in solving this critical yet seemingly oxymoronic question. Under the static/current law approach, it requires a multi-pronged approach that combines decentralized jurisdictions with decentralized entities/ purpose/products. Under the progressive approach, where law is a viewed as a construct and evolves to adapt the needs of society, DAOs can be recognized under the private international law, which will be aligned with DXdao’s ultimate vision as self-sovereign.
3.I’ve also presented my findings at the Business Strategy call, you can find the presentation deck here:
Please don’t hesitate to reach out if you have questions or want to discuss further. My Keybase is @pecheusedelune.