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Establishing a foreign foundation company can be a complex endeavor that requires legal foresight. Nevertheless, it has become an increasingly popular choice for DAOs looking to minimize tax burden while taking advantage of its flexible framework in facilitating governance protocols off-chain. Decentralization is no easy feat, and it's not something that can happen with the snap of a finger. Network founders should be wary of any shortcuts they may take in their journey to decentralized - establishing a foundation that doesn't align with DAO goals won't get them closer to truly decentralized autonomy. In our recent blog exploration, we highlighted several DAO wrapping options with varying complexities - from the simplicity of a Swiss Association or Foundation to the more exotic Cayman Islands Foundation and Marshall Island LLC. Let's take it one step further: how does the legal framework surrounding Panama Private Interest Foundations (PPIFs) compare? General information Established by the Panamanian government, the Panama Private Interest Foundation (PPIF) is an offshore asset protection solution designed to provide financial confidentiality and stability. Its structure reflects inspiration from Liechtenstein's 'Stiftung,' as well as private foundations in Switzerland and Luxembourg — providing key differences from traditional offshore companies, such as non-participation in commercial activities. A Panama Foundation offers a unique layer of asset protection, as it is distinct from other legal entities under Anglo-Saxon law in that no individuals or entities own the Foundation. Every person connected to the Private Interest Foundation has separate holdings with assets not associated with one individual. Key roles in Panama Private Interest Foundation Founder of the Foundation gets to appoint and remove members of a Foundation Council and make an endowment. Foundation Council is a core component essential to achieving the goals of any foundation. A minimum of three members are required for it (unless the council is a juridical person), and each will be charged with carrying out the aims outlined in its charter or regulations. They must uphold both secrecy and confidentiality at all times. A founder can participate in the Foundation Council. Beneficiaries of a Foundation: Foundation Council hands over to beneficiaries of foundation assets or resources settled in their favor in a Foundation Charter or its regulations. To ensure the highest level of trust and security, a Protector or other supervisory body may be appointed. Primarily consisting of either natural persons or legal entities, the roles assigned to supervisors shall be written within the Foundation Charter and its Regulations. Additional facts about a Panama Private Interest Foundation The Foundation shall not be profit-oriented; it should be funded by an endowment of at least $10,000 which can be denominated in any official currency and must only serve the purpose outlined as the Foundation's objectives. In Panama, you can benefit from total tax exemption on all income not originating in the country. Unfortunately, since it is not a party to the Madrid Agreement or Madrid Protocol, international Intellectual Property registration cannot be sought there. * * * Need experienced international counsel? Don't delay - contact us now for your complimentary consultation and the benefit of our finely honed legal expertise! DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

With the recent surge in Decentralized Autonomous Organization projects, entrepreneurs are searching for innovative legal structures to ensure their project succeeds. One intriguing and viable solution is a Cook Islands Foundation - providing an enticing alternative compared to traditional options such as Swiss Foundations and Associations, Cayman Island Foundations, or Marshall Islands LLCs. This blog provides you with a quick overview of this captivating option. Incorporation Documents The incorporation process for a foundation has several steps to ensure legally sound operations, including the formalization of documents such as the Foundation Instrument, which specifies name and purpose along with details like registered agents. Additionally, there are Foundation rules established by a council of a foundation that governs internal proceedings, responsibilities, etc., as well as granting powers required in any rule-based system. Finally, a Certificate of Establishment is issued upon registration. Key Roles Founder: instructs a trustee to apply for the establishment of a foundation; dedicates assets to a foundation; has rights and obligations under foundation rules. Beneficiary (optional): exists in case a foundation has the provision of a benefit to a person; has no interest in foundation assets (however, can be entitled to a benefit under foundation rules); default beneficiary receives foundation's assets in case of dissolving. Dedicator (optional): a person other than a founder who dedicates assets to a foundation; thus, it is possible to transfer assets to a foundation without being considered a founder. Enforcer (optional): controls the council; has powers according to foundation rules. Council of a foundation (obligatory): carries out foundation's objects, manages property; consists of at least one member; approves financial statements; member of a council can be fined for offenses (section 83 (3) of the Foundations Act 2012); apart from a founder and trustee a person cannot be both a member of a council and an enforcer; council members may be natural persons or legal entities from any country. Registered agent (obligatory): a Cook Islands registered trustee company that provides a registered office for a foundation; can be a foundation council member. A quick look at the main legal issues regarding Cook Islands foundation A foundation is brought into being once an initial endowment of a property has been gifted, and there are no minimum capital requirements. Non-charitable objects are allowable, and should the foundation be without assets, it must be dissolved under Section 70 (1) of the Foundations Act 2012. There is no default option for the voluntary dissolving of a foundation; the respective provision should be established in foundation rules. Direct commercial trading that does not support the attainment of stated objectives isn't permitted according to section 35(3) of said act. Foundation officials may be legally accountable for liabilities arising from their operations. Foundation has legal personhood, without shareholders and with the inclusion of a register of beneficiaries being optional under the Foundations Act 2012. Trustees act as reporting institutions according to Financial Transactions Reporting Amendments 2017 – similar laws seen in other jurisdictions following FATF Recommendations. Finally, foundations exhibiting broad control over their activities can constitute high-risk indicators within this jurisdiction. All transactions must exceed 10 000 NZD (estimated 5 600 USD) for monitoring measures to apply accordingly. Looking for a dependable and budget-friendly legal solution? Our experts are here to provide you with the perfect fit that meets your needs. Get in touch today and put an end to endless legal issues. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

Since the introduction of the Foundation Companies Act in 2017, foundation companies have become a popular way to provide stable legal wrappers for Decentralised Autonomous Organisations (DAOs). Unlike typically structured organizations with clear shareholder ownership and control, DAOs are managed through community governance. This is where foundation companies offer their unique advantage - they can be legally recognized without any shareholders or directors involved. In other words, ownerless yet compliant entities are tailored perfectly to meet the needs of those running blockchain projects today. What is a Cayman Foundation? Cayman's foundations are revolutionary legal entities with the power to function like a trust or foundation while providing limited liability and an intriguing ownerless approach. Beneficiaries can receive potential benefits from these unique structures over time, all under robust control outside of those directors running it. The supervisor's role is primarily that of an overseer, with the power to take action should directors breach their fiduciary duty. This responsibility and authority are laid out in detail in Cayman Islands law for each moment when passing crucial resolutions becomes necessary. Key Advantages of a Cayman Islands Foundation By its very nature, a foundation has no owners and is highly compatible with decentralized organizations (DAO) and DeFi projects which prioritize decentralization. Furthermore, the establishment of a separate legal entity grants it reliable corporate standing, ready to execute contracts as well as open accounts at banks or exchanges. Finally, advanced control mechanisms can be implemented by allocating them to persons external to the directors— allowing founding members an influence in determining the direction taken by their organization. Cayman foundations are a popular choice for crypto projects and venture capitalists alike due to their clear, advantageous regulatory framework. Plus, with express incorporation possible in as little as 24 hours when KYC processes are completed - setting up your foundation has never been easier. For added convenience, there is also an excellent array of experienced local service providers readily available to provide registered office services along with individuals qualified for the roles of secretary, director, and supervisor positions. When it comes to confidentiality, the foundation can outline practical details of its operations through private bylaws that are kept separate from any constitutions. Additionally, considering there is no corporate tax or capital gains in Cayman proves another attractive factor for many looking to establish foundations here. Other Cayman Legal Acts to Adhere Any project conducted in the Cayman Islands must adhere not only to provisions of the VASP Act but also to an array of other laws and regulations. This can include sanctions legislation or Anti-Money Laundering Regulations, as well as Securities Investment Business Acts, International Tax Co-operation (Economic Substance) Act, and Data Protection Act. Compliance with all relevant legal requirements is paramount for successful operations in this jurisdiction. * * * Let us help guide your team toward success! An expert legal review of your project can save money, time, and potential headaches. Reach out to our talented professionals today for the assistance you need. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

MICA, which stands for Markets in Crypto-Assets Regulation, is a regulatory framework proposed by the European Commission to supervise and monitor crypto asset service providers (CASPs) in the European Union. MICA aims to create a harmonized and comprehensive regulatory framework for CASPs to ensure consumer protection and market integrity. MICA is important for CASPs because it represents a significant step towards regulating the crypto asset industry in the EU. Under MICA, CASPs will be subject to authorization, ongoing supervision, and monitoring by regulatory authorities. The proposed framework also sets out requirements for risk management and compliance functions, which will be mandatory for all CASPs operating in the EU. MICA represents a significant milestone in the history of blockchain. It is the first regulatory attempt to standardize and define key industry concepts previously considered part of specialized jargon. MICA sets legal definitions for terms such as distributed ledger technology, electronic money tokens, the exchange of crypto assets for fiat currency, and the roles of issuers and service providers in the crypto asset ecosystem. These definitions are crucial in clarifying and establishing a framework for compliance and consumer protection in the rapidly evolving world of crypto assets. Crypto-Assets MICA clearly defines crypto assets as digital representations of value or rights that can be stored and transferred electronically using distributed ledger technology or similar technology. Within this broad category, MICA distinguishes three sub-categories of crypto assets, each with its unique characteristics: Asset-Referenced Tokens: These crypto assets aim to maintain a stable value by referencing the value of one or more fiat currencies, commodities, other crypto assets, or a combination. Electronic Money Tokens: This crypto asset is intended to be used as a means of exchange and maintain a stable value by referencing the value of a fiat currency that is legal tender. Utility Tokens: These crypto assets are designed to provide digital access to goods or services available on distributed ledger technology and are only accepted by the token issuer. MICA does not cover security tokens, as these are already regulated under the Directive on Markets in Financial Instruments (MiFID II) and are considered financial instruments. Whitepapers Issuers of Asset-Referenced Tokens, Electronic Money Tokens, and Utility Tokens under MICA must draft white papers that meet specific requirements. These white papers should include the following: General information about the issuer and key project participants A description of the project being offered to the public and the reasons for offering the crypto asset Details about the number of crypto assets to be issued, as well as a comprehensive description of the rights and obligations associated with the crypto assets and the procedures and conditions for exercising those rights Information about the technology and standards used by the issuer, as well as a detailed description of the risks associated with the crypto asset In addition, appropriate risk warnings must be included in the white papers to caution prospective investors about the high-risk nature of crypto assets, the potential for loss of value, and the lack of liquidity. It's clear from these requirements that drafting white papers for issuing crypto assets is similar to issuing a prospectus for a public company's offering. However, the drafting process for white papers is generally more relaxed and has fewer and simpler formalities compared to prospectuses for public offerings. Taxation The current stance on the taxation of crypto-assets is that funds obtained from initial coin offerings are taxable income and taxed at a standard rate of 12.5% for companies. The case of Hedqvist C-264/14 serves as the basis for the VAT treatment of transactions involving the exchange of traditional currencies for bitcoins and vice versa. The European Court of Justice (ECJ) determined that such transactions constitute a supply of services for consideration but are exempt from VAT. Crypto-Asset Service Providers MiCA sets out that only legal persons with a registered office in a Member State of the Union who have been authorized by their home member state's competent authority to operate as crypto-asset service providers are permitted to offer Crypto-Asset services. MiCA's Article 54 outlines the necessary information that must accompany an application for authorization of a crypto-asset service provider, while Article 61 specifies the organizational requirements that must be adhered to. According to MiCA, members of a crypto-asset service provider's management body must possess the qualifications, experience, and skills to fulfill their duties and demonstrate the ability to commit sufficient time to their functions. Natural persons who hold over 20% of the service provider's share capital and voting rights or exercise control over the provider must also demonstrate a good reputation and competence. MiCA includes a significant feature allowing crypto-asset service providers to offer cross-border services throughout the EU. Under Article 58, such providers can operate in multiple Member States, subject to submitting certain information to the competent authority in their home Member State. The required information includes the following: A list of the intended Member States where the services will be provided. The start date of such provision. A list of other activities the provider offers that MiCA does not cover. Within 15 days of submitting this information, the crypto-asset service provider may begin operating in a Member State other than their own. In general, MiCA introduces various regulations for CASPs that cover areas such as governance, capital, insurance, and transparency. Notably, despite the perception of crypto-assets as a riskier asset class than traditional financial instruments due to factors such as transparency, money laundering, and market volatility, the minimum capital requirement for major CASP players is set at €150,000. This contrasts the €750,000 minimum capital requirement for similar service types, such as dealing on own account and operating a trading platform, under MiFID II. * * * At Prokopiev Law Group, we offer our expertise in EU crypto regulation. We are well-versed in the emerging field of Decentralized Autonomous Organizations (DAOs), providing comprehensive legal advice to businesses and individuals navigating the complex legal and regulatory landscape surrounding these innovative technologies. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

Blockchain technology has taken the world by storm in recent years. It has become a game-changer for many industries, offering transparency, security, and data immutability. However, with implementing the General Data Protection Regulation (GDPR) in the European Union (EU), concerns have yet to be raised about how blockchain technology complies with GDPR requirements. The GDPR is a comprehensive privacy and data protection regulation that applies to all entities that process the personal data of EU residents, regardless of where the entity is located. This article explores the relationship between blockchain technology and GDPR and how we can ensure compliance with GDPR while leveraging the benefits of blockchain technology. The Right to Erasure (Right to be Forgotten) and Blockchain GDPR grants individuals the right to erase (also known as the right to be forgotten) their personal data in certain circumstances. However, this right can clash with the nature of blockchain technology, which is immutable and designed to prevent data tampering. Blockchain technology is based on a decentralized ledger, where data is stored across a network of nodes. Once data is recorded on the blockchain, it cannot be altered or deleted without consensus from the network. This makes it difficult, if possible, to remove personal data from the blockchain once it has been added. This poses a significant legal risk for companies that process personal data using blockchain technology, as they may be unable to comply with requests to delete personal data under the GDPR. This can result in penalties and legal disputes. Furthermore, the risk of non-compliance with the GDPR can deter individuals from using blockchain-based services, which can harm the adoption and development of blockchain technology. To address this issue, companies using blockchain technology should consider implementing technical measures to ensure compliance with the GDPR, such as encrypting (if compliant) personal data or using private blockchain networks with more control over data management. In addition, companies need to ensure that individuals are informed about the limitations of the right to erasure when using blockchain-based services. This can be done through clear and concise privacy notices and terms of service agreements. The Right to Data Portability and Blockchain GDPR introduced the right to data portability, which allows individuals to receive a copy of their personal data in a structured, commonly used, and machine-readable format. This right is intended to promote data subjects' control over their data and encourage competition in the digital market. However, the right to data portability presents a challenge when it comes to blockchain technology. Blockchain is designed to provide immutable and permanent records that cannot be easily altered or deleted. The decentralized nature of blockchain also means that the data is stored on multiple nodes, making it difficult to comply with data portability requests. To comply with the right to data portability, blockchain-based systems must ensure that individuals can access and transfer their data in a format compatible with other systems. This requires interoperability standards to be established across blockchain networks to enable data exchange. Moreover, blockchain-based systems must also ensure that personal data is encrypted and protected when transferred or accessed by the data subject. The encryption keys should only be accessible by the data subject, not the blockchain network, to ensure data security and privacy. The Right to Access Personal Data One of the fundamental rights of the GDPR is the right for individuals to access their personal data. This right allows individuals to obtain confirmation from data controllers whether their personal data is being processed and to receive a copy of the data. However, unlike traditional databases, decentralized and immutable blockchain makes it difficult for individuals to exercise their right to access personal data as it may be stored across multiple nodes in the network. The anonymous nature of many blockchain transactions can make it difficult for individuals to identify which personal data is theirs, making it challenging to exercise their right to access that data. Lawful processing of personal data Ensuring GDPR compliance in a blockchain project is crucial to avoid legal risks and reputational harm. Firstly, a system must be designed to prohibit or prevent personal data from being stored or referenced on the blockchain. Secondly, relying on encryption for on-chain data that could contain personal data is risky. With the rise of quantum computing, all forms of encryption could become vulnerable to attacks, making it essential to seek alternative approaches to secure personal data. Thirdly, the blockchain must be designed so that on-chain hash information and metadata can be rendered valueless. This can be achieved by deleting off-chain data and destroying keys, ensuring that sensitive data is not identifiable. Fourthly, it is crucial to delink a key owner's identity from the key belonging to that key owner. In other words, the signer of a transaction should not be identifiable as a natural person. Finally, determining governance rules for participants in a DLT network to support GDPR accountability is necessary. Conducting privacy risk assessments for risk mitigation is also vital in ensuring that the project complies with GDPR regulations. A blockchain project can effectively mitigate privacy risks and ensure compliance with GDPR regulations by following these measures. Anonymization and Pseudonymization on the Blockchain Anonymization and pseudonymization are two techniques commonly used to protect personal data privacy. Anonymization removes identifying information from data, making identifying an individual almost impossible. Pseudonymization replaces identifying information with pseudonyms, which can only be linked to individuals through additional information. In the context of blockchain and GDPR compliance, anonymization and pseudonymization can be used to protect personal data privacy. However, it is essential to note that simply anonymizing or pseudonymizing data does not automatically ensure GDPR compliance. As the European Data Protection Board (EDPB) has indicated, adequate anonymization requires that the data cannot be linked to a specific individual, even if combined with other information that may be available. This can be a difficult threshold to meet, particularly in blockchain, where immutability is a key feature. Furthermore, pseudonymization, which involves replacing identifiable data with pseudonyms, may not always be enough to ensure compliance. If the pseudonym can still be linked to a specific individual, it may still be considered personal data under the GDPR. Therefore, it is crucial for blockchain projects to consider the methods they use for anonymization and pseudonymization carefully and to ensure that they comply with the GDPR's requirements for protecting personal data. Cross-border data transfers and the blockchain As blockchain networks are often global, cross-border data transfers are common in the context of blockchain transactions. However, such transfers raise concerns about GDPR compliance, especially when personal data is involved. According to GDPR, the transfer of personal data outside the European Economic Area (EEA) is allowed if the destination country ensures an adequate level of protection of personal data. Data protection adequacy is assessed based on the legal framework and enforcement mechanisms in the recipient's country. Blockchain networks, by their nature, are decentralized and operate across multiple jurisdictions. As such, it can be challenging to assess the adequacy of data protection in each jurisdiction where the data may be processed or accessed. This can create legal risks for blockchain projects that involve cross-border data transfers. Generally, a project should be ensured that individuals whose personal data is transferred are informed of the transfer and the adequacy of data protection in the destination country. Individuals must be given the right to object to transferring their personal data and have their data erased if it is transferred without their consent. *** In conclusion, compliance with GDPR is crucial for blockchain projects that handle personal data. Our team has extensive experience advising on GDPR compliance in various industries, including blockchain and cryptocurrency. We understand the challenges and legal risks of using blockchain technology and have helped multiple clients navigate the complexities of GDPR compliance. If you require legal assistance with GDPR compliance for your blockchain project or have any questions, please do not hesitate to contact us. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

With its renowned regulation, banking, and corporate services, as well as a flexible legal framework, Switzerland is an ideal choice for those seeking to establish their DAO. However, this option comes with one major downside: cost. Establishing and maintaining your organization through the Swiss Foundation may be prohibitively expensive compared to other jurisdictions. Pros and Cons Switzerland boasts impressive benefits as a jurisdiction for decentralized autonomous organizations (DAOs). Its existing legal framework - comprised of the Swiss Code of Obligations and Civil Code - provides an ideal setting to set up these operations. The country's approach towards applying general regulations means they are equipped to handle challenges unique to this type of organization. Benefits: Switzerland offers a uniquely flexible legal system that allows for an extensive range of economic opportunities, including cooperation with over 240 banks and secure investment. Its reputation as one of the top crypto hubs worldwide has attracted major players to set up their foundations there - making it also attractive for investors due in part to limiting personal liability granted by establishing individual legal personality via Swiss foundation structures. Difficulties. Establishing a Swiss foundation for your DAO Legal Wrapper may be unnecessarily complicated and expensive. The foundation must appoint a local director and provide an initial capital amount of 50,000 CHF. Furthermore - once established - amending the constitutional documents is quite challenging due to bureaucratic red tape; even document translation can come into play depending on which canton you're located in. More details about the Swiss Foundation To ensure your foundation's success and compliance with the law, it is essential to define its purpose in advance. The government will regulate activities you take to achieve this goal, so please be aware of their restrictions before undertaking any action - e.g., using an endowment only towards one cause instead of multiple causes or investing project funds in unrelated ventures. With a clear mission statement established from the outset, there are no limits on what your foundation may accomplish. The foundation has been officially documented in the commercial register, allowing considerable flexibility to establish its DAO governance structure. Its charter will define how it is governed and operated, providing a secure basis for the efficient administration of activities. With the relevant legislative framework in place, a standard structure of DAO enables members to partake in decisions regarding administering and governing bodies within its charter. These rules are further clarified by prescribed rights and voting powers among members and set out by constitutional documents and smart contracts. We can help! Get the advantage of simple, cost-effective legal protection for your web3 project! Today is a great day to get started on top-notch advice in navigating tricky and ever-changing regulations - contact us now and reap the benefits. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

Benefits The Marshall Islands have emerged as a leading jurisdiction for DAO establishment, providing the perfect balance of legal flexibility and convenience. With just three founding members needed to set up your entity - whether individuals or entities - plus only two weeks to obtain a license, it's easy to see why this is becoming an increasingly popular choice by many looking to incorporate their DAOs. Furthermore, unlike other jurisdictions such as Swiss foundations, you can access these benefits at an affordable price point, making it one of the most attractive alternatives today. Legal form The Marshall Islands have proposed a unique legal entity form for DAOs - the non-profit corporation (limited liability company). This groundbreaking move seeks to provide further flexibility and control, allowing members' ownership of such an organization to be specified in traditional documentation and their blockchain-based smart contracts. At its core lies the need for clarity over purpose: all companies must clearly state how they will connect with any potential non-profit activity through their Certificate of Incorporation submitted at set up. How does it work A Decentralized Autonomous Organization (DAO) is a type of limited liability company that grants members specific control over the management. The three key documents are the Certificate of Incorporation, the Operating Agreement, and the Charter. These documents dictate how a company operates, outlining everything from voting procedures to treasury creation & management. All these matters can be amended by members' decisions while adhering to past versions outlined in an operating agreement. Registration procedure Establishing a DAO requires careful preparation - from defining the name and purpose of your organization to completing KYC for all founding members, as well as any other person with 10% or more governance rights. To expedite this process, it is strongly recommended that the Operating Agreement be based on an appropriate template which can then be amended upon incorporation. Subsequently, signatures must be affixed to the Certificate of Incorporation, as well as to the Foreign Business Investment License form, before filing these documents, along with a signed operating agreement at the regulator's office. Upon the regulator's approval of all documents, founders receive their Charter to bring a limited liability company into existence. How can we help? We can simplify the process for you to the maximum extent. While you manage your new exciting project, we cover all legal issues and provide comprehensive legal support. If you have doubts, we can offer first free legal advice to you. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

Key points on what is DAO? A decentralized autonomous organization (DAO) is a new-generation organizational structure with no central governing body whose members participate in the governance and share a common goal depending on the aim of a DAO. Power in a DAO is distributed across tokenholders who collectively cast votes, with all votes and activity generally posted on a blockchain. Security must be prioritized in a DAO, as exploits can lead to the loss of funds from the DAO treasury. Does your DAO need a legal wrapper? Personal Liability. A DAO needs a legal wrapper for many reasons; chief among them is the need to interact with other parties, protect the liability of contributors, hire employees legally, and pay taxes. A DAO would be considered a general partnership without a legal wrapper, or even each DAO member may be treated as a single person operating without a business license. Non-wrapped DAO leaves all of the contributors exposed to potential lawsuits and liabilities. Corporate Personhood. When entering into agreements with other parties like investors or vendors, a DAO must have corporate personhood to sign legally binding contracts. Without this corporate persona, any agreements made in the name of the DAO may not hold up in court. Similarly, if your DAO wants to hire employees (or contractors), it will need to create some form of legal structure in order to register those hires and pay taxes accordingly. Transparency and Accountability. By creating a legal wrapper for your DAO, you can also gain access to more funding opportunities and require greater transparency from your contributors when making decisions or voting on proposals. This is because when you incorporate as an LLC or other entity type, certain rules and regulations must be followed within the organization. For example, there may be restrictions on allocating or using funds and reporting requirements regarding contributor activities and decision-making processes. By creating these guidelines, you can ensure that all decisions are fair and transparent while avoiding any potential conflicts of interest within the organization. Compliance. Ultimately, having a legal wrapper for your DAO is essential if you want it to operate successfully in compliance with local laws and regulations while providing protection for everyone involved in the organization from liabilities or lawsuits arising from its actions. It also helps keep everyone accountable for their actions since they know there will be consequences if they fail to follow proper rules and procedures put in place by the legal structure surrounding their operation. What Options for Legal Wrappers Are There (Non-U.S. Based)? The Marshall Islands LLC The Marshall Islands are a good place to register a DAO because they have a legal framework that recognizes DAOs as their own entity. This is especially helpful for those who want to avoid registering an LLC separately or those based outside of the US who still want access to US services. The Swiss Association The Swiss Association is a legal wrapper for DAOs, providing them with a framework to register as nonprofit organizations in Switzerland. This option offers DAOs the opportunity to gain recognition in a country that is seen by many as being one of the most blockchain-friendly countries in the world. It allows them to be seen as an official, legitimate entity that can operate within the confines of the country's regulations. The process of setting up and registering with this framework does not require an extensive amount of paperwork; however, it does require that DAOs present their bylaws upfront and list their board members before registration can be completed. While this does not allow for full decentralization, it does provide reliable protection from potential legal attacks or other negative consequences associated with operating without a recognized organizational structure. For early-stage DAOs looking for an easy way to obtain recognition while still keeping some level of decentralization, the Swiss Association framework can be a great solution. One added benefit is that it can be used by any DAO regardless of its location, making it highly accessible no matter where one is based. Additionally, assuming all criteria are met, such as having board members ready to appoint and well-defined bylaws prepared beforehand, then setting up a Swiss Association should be relatively straightforward and efficient. The Cayman Islands Foundation Due to its regulatory environment and legal framework, the Cayman Islands is an ideal jurisdiction to create a Legal Wrapper for DAO. The country has adopted special regulations for Virtual Assets Service Providers (VASPs), which provide clear guidance on how companies should work with virtual assets. This ensures that companies have the necessary information they need to set up a compliant operation. Furthermore, the flexibility of the common law system in the Cayman Islands makes it quite universal in its application and operation around the world. Companies can create a trust or a foundation in this jurisdiction, with the latter being the most suitable form for a DAO wrapper, as there are no centralized owners or shareholders within a DAO entity. This type of legal entity also provides protection from legal disputes and offers tax benefits for users of such structures. The cost of registering a foundation in the Caymans Islands is lower compared to other jurisdictions such as Switzerland, Singapore, and Liechtenstein. There are also no mandatory minimum contributions that can affect the cost. In addition, setting up a DAO Foundation usually takes only 1-2 months, making it much faster than other jurisdictions. The many advantages of the Cayman Islands as a DAO legal wrapper make it one of the most popular jurisdictions when creating an entity related to distributed autonomous organizations (DAOs). Aside from having favorable regulations and low costs, companies can benefit from quick setup times and highly reliable legal protection with respect to their digital assets. As such, this jurisdiction is ideal for those looking to reap all available benefits when launching a distributed autonomous organization. Do not hesitate to contact us! Members of our team are big fans of new technologies and organizational structures. We are helping our clients to set up DAOs constantly and know all pitfalls of each jurisdiction. We propose affordable legal solutions for startups of any size. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.