Crypto Giggle
In the last few days, there have been a number of DAO-related developments. Wyoming’s recently passed legislation created a framework for decentralized autonomous organisations (DAOs). It introduced decentralized non-incorporated nonprofit associations, which allowed them to perform legal obligations, engage in banking and enter into contracts.
The Arbitrum DAO retracted a proposal that would have funded the Tornado Cash developer’s legal defense. MakerDAO also implemented fee adjustments to respond to the market volatility in order to maintain stability for its Dai stablecoin, as there have been concerns raised about liquidity.
DAOs: Legal Status
Wyoming’s Governor Mark Gordon signed into law, a bill that allows for the creation and management of autonomous decentralized organizations in the state. This legislation, which was sponsored by the Select Committee on Blockchain, Financial Technology and Digital Innovation Technology, introduced the concept of unincorporated decentralized nonprofit associations as a legal entity.
Bill was passed on March. The law outlines in detail the steps to form a DUNA. It also explains the importance of smart contracts, and lays out legal responsibilities for the association as well as its members. The law distinguishes DUNAs from the members of an association, ensuring they aren’t held responsible for DAO contract breaches. The DAOs can function independently of central leadership. This allows them to be governed by a group-driven decision-making process, based on blockchain rules.
This law is revolutionary in that it allows DAOs the opportunity to work with existing legal and financial frameworks. These decentralized entities are now able to engage in contracting, open a bank account, pay tax, and meet information reporting requirements just as other legal entities.
The legislation, however, has generated some debates about its interpretation. This is especially true in relation to the nonprofit status. The venture capital firm, a16z Crypto highlighted that there is a fundamental misunderstanding when it comes the designation of nonprofit by law. According to the analysis of a16z, Wyoming DAOs, even though they are nonprofit organizations, can still engage in commercial activities. The clarification allows DAOs the opportunity to engage in commercial activities, such as running social media protocol or decentralized exchanges.
Tornado Cash Developers Lose DAO-Backed Legal Aid
Other DAO news: The Arbitrum DAO has recently removed a proposal which planned to use funds from the community to help Tornado Cash developers Roman Storm, and Alexey Prittsev defend themselves in court. This initial request was made on March. The pseudonymous DK delegate, who submitted the initial request on Mar. These funds would be used not just for legal costs, but for advocacy and public relations efforts to promote privacy-preserving technology. The proposal was removed at DK’s request, confirmed by a spokesperson for Arbitrum without providing any further details about possible motives.
Tornado Cash is under investigation, as it has been accused of laundering more than one billion dollars in illegal funds. This includes transactions that are linked to Lazarus Group, a notorious hacking collective. US government charged the developers of Tornado Cash with money laundering, sanction violations and running an unlicensed business. Pertsev, who was captured in the Netherlands by the FBI on August 20, 2022 and Storm in August 2023. Roman Semenov is the third founder, and he remains at large.
Supporters of Tornado Cash, on the other hand argue that Tornado Cash is a platform which provides software to decentralize money transfer without actually engaging in it. The legal action against Tornado Cash and its developers is seen by them as an broader threat for people who are working on privacy-focused apps.
A crowdfunding campaign on GoFundMe, which was intended to raise funds for Storm’s and Pertsev’s legal defence, has also been terminated. This happened on February 16. GoFundMe said that the effort violated its terms of services and could cause harm to its platform, employees or users.
MakerDAO Fee Adjustments
MakerDAO (the organization that developed the Maker (MKR token)) recently approved an “Executive vote” in order to make temporary adjustments to fees in response to the market volatility, and the bullish sentiment which has led to the decrease of reserves for the Dai (DAI), its stablecoin. The decision was made after Dai’s supply fell from $5 billion down to $4.4 in just one week.
This proposal will safeguard the protocol, if it is necessary to redeem some of the real-world assets ($1.1 billion) that are available through the protocol. Dai is overcollateralized but the use of RWAs for collateral could cause liquidity problems if Dai’s selling pressure continues. It was also noted that the proposal raised concerns over liquidity issues due to RWAs being used to use stablecoins. This is despite Dai having sufficient reserves to handle a bullish marketplace.
MakerDAO has adjusted a few elements of its ecosystem to address this concern. The adjustments made include increasing stability fees from 15% to 17,25% on various collateral assets, as well as the SparkLend DAI Borrow’s annual percentage yield going from 6,7% to 16 %. The Peg Stability Module has been adjusted to reduce the cooling down period for increasing debt ceilings from 24 hours to 12 hours. It also increased the Dai savings rate to 15% and reduced the Governance Security Module’s (GSM) pause delay from 48 to 16 hours. The changes are effective since Mar. 10.
MakerDAO is yet to share plans on how it will return the fees back to their initial rates, despite these temporary adjustments. GFX Labs a Blockchain Research and Development Company has given some feedback on the proposal. They believe that these changes are a positive step. This proposal has also raised concerns about its magnitude, which could cause market disruptions.
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