Marshall Islands legally recognizes DAOs as domestic limited liability companies

The Republic of the Marshall Islands, an independent island state located in the Pacific Ocean near the Equator, has announced that the Decentralized Autonomous Organizations Act of 2022 has officially been passed into law.

The law recognizes decentralized autonomous organizations and enables legal entities registered in the country to formally adopt DAO structures and governance tools. The government hopes this latest move will encourage the growth of decentralized entities and their accompanying elements within the state.

According to the announcement, the DAO Act of 2022 will allow DAOs to incorporate under Limited Liability Companies (LLCs), enabling them to identify as DAO LLCs. The act is also poised to allow both for-profit DAOs and not-for-profit DAOs to register while providing definitions and regulations for DAO formation, agreements, and use of smart contracts. Additionally, the novel act allows for the creation of an investment fund for the government of the Marshall Islands to continue education and training around DAOs and their integration into the economy.

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The finance minister of the Republic of the Marshall Islands, Bransen Wase, shared: “With this adoption of the DAO Act of 2022, The Marshall Islands commits its courts and its resources to the burgeoning world of decentralization, and recognizes the unique place that decentralized autonomous organizations can hold not just in the blockchain space, but in the broader economy as well.”

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In February, the Marshall Islands formally recognized DAOs as legal entities, allowing them to register and establish operations in the country. The new law goes beyond this by allowing entities to incorporate as DAO LLCs and identify as such. 

Over the past few years, the Marshall Islands has been actively exploring use cases for digital assets, with the government introducing measures to create a blockchain-based cryptocurrency dubbed Sovereign (SOV).