The United Arab Emirates is set to reveal a legal framework for decentralized autonomous organizations (DAOs). The Ras Al Khaimah Digital Assets Oasis (RAK DAO), a digital assets economic free zone in the UAE, will announce the framework at the DAO Legal Clinic on October 25. The framework aims to clarify the legal steps necessary for DAOs to operate within the law, a move that is expected to significantly impact decentralized governance and the broader web ecosystem in the UAE.
RAK DAO aims to provide a legal context to meet the governance needs of DAOs. The proposed framework will outline how to establish a legal structure, which will include clear tax obligations and benefits for DAOs. Legal structures will also grant DAOs the potential to possess both on-chain and off-chain assets, offer legal protection for DAO founders, members and contributors, and provide opportunities to negotiate legally binding agreements while addressing potential disputes.
Irina Heaver, a partner at the law firm NeosLegal, indicates that DAOs won’t need to be physically located in the UAE to register under the new regulations. Remote establishment, coupled with the ability to open bank accounts, provides a convenient method for global DAOs to engage with the UAE’s growing virtual asset industry, without the necessity of relocating.
This new legal framework is anticipated to reaffirm the UAE’s stand as a global epicenter for blockchain and digital asset innovation, and in doing so, further attract prospective entrepreneurs and developers. Notably, these legal provisions, also referred to as ‘legal wrappers’ for DAOs, are a more affordable alternative, in comparison to similar options in countries like Switzerland. Reportedly, the process starting cost in Switzerland is about $46,000, while in the UAE, the cost would start at $3,000.
This cost-effective approach, as per Heaver, should enable even smaller DAOs to adopt legal protection and, in turn, afford them the chance to operate within such a legal framework.