Utah State Legislature passes the Utah DAO Act 

The Utah State Legislature, recently passed the Utah Decentralized Autonomous Organizations (DAO) act, otherwise known as under Act HB 357,

Reported at the beginning of March by the National Law Review, the Act resulted from combined efforts between the Digital Innovation Taskforce and the Utah Blockchain Legislature. 

Utah DAO act 

The Utah DAO act was recently passed by the Senate and House committees and approved at the beginning of March 2023. Utah’s DAO act grants DAOs a legal recognition form that’s specific to Decentralized Autonomous Organizations (DAOs). 

The act also gives limited liability to DAOs, making them a pace starter in the rising tech hub for decentralized marketplaces. 

The act defined DAO ownership that complies with the ethos of DAO communities, using bylaws to protect their ownership through anonymity censoring 

Quality assurance DAO protocols are introduced through the act, creating a clear nuance tax treatment employing updated DAO functionalities. The bill is similar to the Coala DAO model law.

DAO Act concerns and compromises 

The act had some major concerns and compromises. One major concern was the DAO base anonymity unaccountability. To curb these concerns, a compromise was agreed upon that requires DAOs to divulge an incorporator but still maintain anonymity. 

Also, the LLC flow-through language used as the original tax language is incompatible with federal and state tax realities. As a compromise to this taxation concern, an acceptable tax language was proposed by the Utah Tax Commissioner’s office. This aimed at providing a compatible language that handles all DAO tax languages’ complex nature. 

The final concern is the lack of ramp-up time to handle new applications that are normally done by the Utah Division of Corporations. As such, the date bill was set to 2024, allocating more time to edit and adjust practical implementations towards the bill. The DAO bill will be implemented in 2024. 

Department of Marshal Islands also approved their DAO Act last year that also identified DAOs as limited liability companies (LLC). The DAO permits the state’s legal units to ensure formal DAO structure adoption. Next year shows promise toward the forging of a Utah LLD in January. For info, follow crypto.news for updates. 


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