Welcome to the DAO Legal Guide focusing on the Marshall Islands DAO LLC, an integral segment of the Pontinova Global Top 100 DAO Legal Report.
Delve into this comprehensive guide to gain insights into the legal set up requirements and the regulatory compliance framework surrounding Marshall Islands DAO LLCs. Explore the other jurisdictions to understand why they excel at fostering DAO initiatives and navigating the intricacies of decentralized governance structures.
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Legal
RMI DAO (Non-Profit) LLCs are incorporated under the Decentralized Autonomous Organization Act of 2022, the Decentralized Autonomous Organization Regulations of 2024, the Limited Liability Company Act and, if applicable, the Non-Profit Entities (Amendment) Act.
Constitution
Certificate of Formation or Limited Liability Company Agreement or Smart Contracts including a statement that the organization is a DAO and delivered to the Registrar of Resident Domestic and Authorized Foreign Corporations for filing, at least one Incorporator who can be either an individual or a company and who do not need to be a resident of the RMI or a member of the DAO, Non-Profit Activity, if the DAO wants to register as a non-profit entity.
Regulatory Board
The Registrar of Resident Domestic and Authorized Foreign Corporations and the Banking Commissioner have the authority to promulgate regulations.
Administration, Management
Registered Agent, Members if member managed or Smart Contract if algorithmically managed.
Reporting, Accounting, Auditing
Accounting and Auditing are not mandatory. Reporting is mandatory on an annual basis between January 1st and March 31st of each year. The Annual Report must contain beneficial ownership information and information relating to leadership, community engagements and financial activities. In addition, DAOs must file a beneficial ownership information Report with the Registrar of Resident Domestic and Authorized Foreign Corporations at the time of formation and at the time of each annual Report. A beneficial owner is an individual who exercises control over the RMI DAO (Non-Profit) LLC through direct or indirect ownership of more than 25% of the LLC's interests or voting rights, through management of the LLC, or other-wise. Any person who engages in unlawful conduct is subject to a civil penalty of USD 500 for each day that the violation continues or is not corrected, and may be fined up to USD 10’000, imprisoned for up to 2 years, or both.
Please note that there is no minimum capital required to set up a RMI DAO (Non-Profit) LLC. The calculation of the incorporation fees should include legal consulting fees. The incorporation duration is about 3 weeks.
Taxation
No corporation tax, capital gains tax, wealth tax, or any other tax is applicable to RMI DAO (Non-Profit) LLCs. For-profit LLCs are taxed with a 3% gross revenue tax excluding dividends and capital gains.
The RMI adopted the Decentralized Autonomous Organization Act on November 25, 2022, making it the first in the world. The Act has since been amended and and has been complemented by the Decentralized Autonomous Organization Regulations in 2024. Hereunder, the RMI classifies as virtual or digital assets (a) virtual currencies, (b) digital consumer assets, and (c) digital securities. A virtual currency is a digital asset used as a medium of exchange, unit of account or store of value. A digital consumer asset is a digital asset that is used or bought primarily for consumptive, personal or household purposes and includes a blockchain token or any other digital asset that does not qualify as digital security or virtual currency. A digital security is a digital asset that constitutes a security, such as notes, stocks, and bonds and that does not qualify as digital consumer asset or virtual currency. The amended DAO Act now allows for the formation of sub-DAOs with separate assets and liabilities (Series DAO LLCs). The amended Act addi-tionally clarifies that governance tokens are not considered securities if they do not confer any economic rights.
Securities and Investment Act [A / VA I]
Applicable to any person who directly or indirectly issues a security. To the extent that a DAO LLC is not, directly orindirectly, issuing, selling, exchanging or transferring any digital securitiesas defined in Section 102 of the Securities and Investment Act to residents ofthe Republic, the provisions of the Securities and Investment Act shall not apply to DAO LLCs. Applicable entities must file a registration with the Registrar of Resident Domestic and Authorized Foreign Corporations and the registered security must be approved by the Cabinet. An exemption may be granted for any security issued by a non-profit entity.
Banking Act [A / VA S]
Applicable to virtual asset service providers. A person is considered a VASP if they are providing (a) an exchange between VA andfiat, (b) an exchange between one or more forms of VA, (c) transfer of VA, (c) safekeepingand/or administration of VA, (d) participation in and provision of financial servicesrelated to an issuer’s offer and/or sale of a VA. Marshall Islands currently doesnot offer VASP licenses, effectively making it illegal to operate a VASP in theMarshall Islands.
Anti-Money Laundering Regulations [P, A / VA S]
Applicable to all VASPs operating within the RMI and carrying virtual asset transfers that qualify as cross-border transfers and virtual asset transactions that exceed USD 1’000.
Check the other DAO Jurisdictions:
• Switzerland - Foundation
• Switzerland - Association
• Liechtenstein - Foundation
• Lithuania - Private Limited Liability Company
• Cayman Islands - Foundation
• British Virgin Islands - Limited Liability Company
• Abu Dhabi ADGM - Distributed Ledger Technology Foundation
• Ras Al Khaimah Digital Assets Oasis - DAO Association