Photo credit: Rakhim Dzhairkhanov

At the recent RAK DAO conference, The Byteline had the privilege of speaking with Luc Froehlich, Chief Commercial Officer at RAK DAO, about the groundbreaking DARe Framework for Decentralized Autonomous Organizations (DAOs).

This framework aims to integrate DAOs into the traditional legal and business environment, and addresses critical needs for DAOs, such as establishing a legal personality, limiting member liability, and ensuring regulatory compliance, while unlocking avenues for DAOs to operate seamlessly with off-chain entities.

Here’s what we learned:

What is the DARe Framework, and what are its main components and objectives?

The main objective is to give a personality to a virtual organization. A DAO exists solely on-chain, which presents numerous challenges when interacting with the off-chain world. For instance, opening a bank account or signing contracts with individuals in the real world becomes difficult without a legal structure.

The DARe Framework aims to create a legal wrapper around DAOs, granting them legal personality. This enables them to engage with the off-chain world, sign contracts, and hold assets, whether on-chain or off-chain.

How does the DARe Framework address liability concerns for DAO members?

Currently, DAO members face unlimited liabilities, which can deter potential participants. If a DAO encounters legal issues, regulators could pursue members, which increases legal uncertainty. The DARe Framework introduces limited liability for members, protecting them from personal exposure.

What impact will the DARe Framework have on existing DAOs?

DAOs can now register their organizations under the new regime, establishing what is known as a DAO Association. This provides them with a legal personality and facilitates communication with regulators and tax authorities.

What are the compliance requirements for DAOs under the DARe Framework?

To establish a DAO Association, members must agree to its formation and clarify the organization’s objectives. As of now, the DARe Framework primarily focuses on non-profit organizations, which do not distribute profits - while nonprofits can pay members for their contributions, capital distribution is not permitted.

What future do you envision for DAOs in the next three to five years?

The possibilities for DAOs are virtually limitless. I began exploring DAOs years ago as part of my master's thesis and have seen their potential grow. While current applications primarily focus on small projects or non-profits, the same governance framework could eventually be applied to larger entities, including governments.

The DARe Framework represents a significant step forward for DAOs, providing the legal structure necessary for their growth and interaction with the traditional world. As Froehlich said, this framework not only protects members but also opens new avenues for DAOs to thrive in a rapidly evolving digital landscape.

Read more: This is just the beginning for RAK DAO

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