DAO regulation in Australia: Issues and solutions, Part 1

Lawmakers in Australia want to regulate decentralized autonomous organizations (DAOs). In this three-part series, Oleksiy Konachevik discusses the emerging phenomenon of DAOs and the risks of stifling potential solutions.

During Australia’s Blockchain Week on March 21, 2022, Australian Senator Andrew Bragg made some interesting statements, one of which was about the intention of lawmakers to implement regulations for decentralized autonomous organizations.

In fact, this is not new, as an Australian Senate committee led by Senator Bragg recommended in October 2021 that decentralized autonomous organizations be brought under the ambit of the Corporations Act, which provides standards for corporate governance and personality.

senator’s plan

So, what did Senator Andrew Bragg say?

“Decentralized autonomous organizations can replace companies. This may be the most significant development since the first joint-stock companies floated on the Amsterdam Stock Exchange in 1602.

He continued: “If it doesn’t listen to policymakers, it probably will. Given that DAOs are recognized as partnerships, not companies, they are not liable to pay company tax.” Company tax was 17.1% of total Commonwealth government revenue. Our reliance on company income tax is not sustainable. “DAOs are a potential threat to the tax base and should be recognized and regulated as an urgency. “

On his website, you can find an expanded version of the statement, where the senator shows some economic data to support his findings.

At this point, I should clarify that the partners of a partnership pay taxes but separately: Individuals pay income tax and companies in a partnership still pay company tax, as do any other ordinary company.

The senator then explains what aspects of the DAO, exactly, the government plans to regulate, “acknowledging the fact that DAOs are self-regulating and transparent, with a built-in system for governance.”

He continued, “The Treasury will need to address these issues, leaving the field open for the DAO to continue to live up to their name. Any attempt to set a code will [would] Be self-defeating.”

Connected: Australian Senators Are Pushing the Country to Be the Next Crypto Hub

Issue

And it doesn’t sound bad, does it?

In fact, if implemented properly, all three objectives can be achieved: consumers will be protected from malicious and unscrupulous businessmen, revenues will be duly taxed and at the same time, DAO’s booming industry will not be suppressed.

And here is a snag. All the DAOs and Fintech regulations we have seen in the world so far have gone down the bureaucratic path of relying on traditional methods and methods. Red tape. The only difference between them is the tightness of the noose.

The problem is that new ways to regulate this industry are not widely discussed among society and politicians. They are not on the agenda. But these concepts do exist, and I spent five years of my academic research working on them.

Connected: Decentralized Autonomous Organizations: Tax Considerations

The risk is that since these new concepts are not picked up, they are not on the agenda of politicians and bureaucrats, so when it comes to regulation, they will refer to existing methods as something they know, and that is not good. because they only know the traditional methods of regulation. But the DAOs came across as a reaction to an obsolete approach, excessive bureaucracy and red tape.

Read about changing the company registry and the “code is law” paradigm in Parts 2 and 3.

The views, opinions and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.