Pacific Personalities - Tatyana Cerullo

Tatyana Cerullo Attorney Marshall Islands Lawyers

What is a decentralised autonomous organisation (DAO) and how does it differ from traditional corporate structures?

A DAO is a new way to organize people using blockchain technology and smart contracts. Usually, the membership tracking, governance, and treasury are on a blockchain and corporate actions are transparent to all members. DAOs represent a fundamental shift in how economic transactions and business models can be reimagined. Using smart contracts, DAO's make it easy and possible for all members to participate. Smart contracts are digital agreements on a blockchain network that are executed automatically upon fulfilling terms and conditions. For example, proposals for a certain action can be submitted to the DAO for a vote, and if the minimum vote is achieved, the action is automatically executed via smart contract and stored on the blockchain. DAOs can be more democratic, efficient, and less prone to corruption. They take the mystery out of the top down approach of traditional corporate governance where the Board or managers vote and take corporate actions. Traditional shareholders are not involved in most decisions and they just have to trust that the decisions from the top are in their best interest. DAOs are in their infancy, but I believe they are the future of human organization.

What drove the Marshall Islands government toward establishing a regulatory framework for DAOs?

I could not say it better than Marshall Islands politician David Paul, who advocated for the new DAO laws:

“The Republic of the Marshall Islands sees DAOs as the first major step toward becoming an internationally recognized and premier hub for the blockchain industry. In whatever shape or form, the digital economy is the way of the future and we want to position ourselves as the jurisdiction of choice. We specifically recognize DAOs at this moment as an early-stage innovation in the blockchain sector, and the Marshall Islands wants to be a leader in the DAO sector.”

What are the key advantages of the Marshall Islands’ DAO regulatory framework compared to other jurisdictions?

A Marshall Islands DAO LLC is relatively easy to set up and at less expense and logistics than a typical Cayman Islands, British Virgin Islands, or Swiss entity. The registered agent for Marshall Islands DAO LLCs is MIDAO, innovative and devoted to evolving into the global go-to for DAOs and Web3 projects. I assisted MIDAO in drafting the amendment to the DAO Act that passed in late 2023 and the regulations, and I can confidently share that the laws allow for great flexibility. Together with the LLC Act, modeled after Delaware’s LLC Act, the DAO Act provides a user-friendly limited liability company. Some highlights of the RMI DAO LLC:

Specially recognized in the Marshall Islands and customized law tailored to the unique characteristics of DAOs;
Governance by smart contract is allowed by law;
Recordkeeping on a blockchain allowed;
Flexible governance structures allowed, can be totally decentralized or not;
Limited liability for all members;
Corporate personhood;
Trustees, directors, officers, or managers with extra liability or responsibility not required;
No local office or local supervisor/director required;
Non-profit or for-profit options;
Low cost (compared to other jurisdictions);
Avoids USA jurisdiction;
Marshall Islands not on blacklist;
Most members can remain anonymous (except beneficial owners with rights of 25% or more do KYC); and
Registered agent is the same for all Marshall Islands DAOs with address in the Marshall Islands