DAO as money transmitter

Having in mind any DAO that raises funds (cryptocurrency) by the way of native token sale, I’d like to raise a question about the status of this unincorporated entity regarding money transmission.

There is a quite new FinCEN guidance about money transmission: https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf and in clause 4.4 it is stated that:

“The same regulatory interpretation that applies to mechanical agencies such as CVC kiosks applies to DApps that accept and transmit value, regardless of whether they operate for profit. Accordingly, when DApps perform money transmission, the definition of money transmitter will apply to the DApp, the owners/operators of the DApp, or both”.

For the term see 1.2.1:

The term “money transmission services” is defined to mean the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. The term “other value that substitutes for currency” encompasses situations in which the transmission does not involve currency, or funds, but instead involves something that the parties to a transaction recognize has value that is equivalent to or can substitute for currency.

See also 5.2 about ICO.

As I understand it from this guidance FinCEN see DAO as a money transmitter. What do you think about it? If it is so, I suppose that precisely curated Identity DAO as a part of the ecosystem becomes vital.


I imagine identity will be the cornerstone of any form of DAO Jurisprudence.

Government Agencies, especially those charged with the responsibility of protecting end-users is not going to magically disappear. They have a moral and professional mandate to ensure these protections on behalf of the people who grant them such power. If DAO’s want to work within this system, they will need to provide satisfactory solutions for these agencies to perform due diligence and uphold these mandates. A reliable Identity system seems to be the only path to offer in this regard. (This applies to all DLT’s)

However, it seems even an optimal identity system will not prevent their views of DAO’s being money transmitters. This issue is separate in my opinion, and could create significant hurdles to DAO creation, as money transmitter licenses aren’t cheap or easy to acquire, especially for small scale DAO’s whose transmission volumes are extremely low (With that being said, I don’t really see any tangible methods of enforcement in regards to DAO behaviors as you would need international law to have consensus on this.) Agencies like FinCEN will need to classify new frameworks for DAO compliance, reporting, and the like.

Also, I’m not a lawyer, just my thoughts on the subject – which I also believe to be an important issue to consider. A lot of legal issues within this space that I believe will need to be addressed, sadly have no precedent, and therefore no clarification. Much of this is because we haven’t seen DAO’s operate outside of the digital realm, and have not presented any conflicts that violate the mandates of recognized legal jurisdictions.

Good post! I look forward to learning more! If you find any good resources, post them!

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