UAE Introduces Legal Framework for DAOs

The United Arab Emirates (UAE) has introduced a structured legal framework for Decentralized Autonomous Organizations (DAOs) through the RAK Digital Assets Oasis (RAK DAO).

This initiative highlights RAK DAO’s commitment to creating an environment where decentralized organizations can flourish. It marks a significant move to bolster the region’s position as a global hub for web3 innovation, with crypto-friendly policies enabling the course.

UAE’s New DAO Law Empowers Crypto and Web3

It comes as RAK DAO, a UAE-based Free Zone dedicated to digital asset companies, launched its DAO Association Regime (“DARe”). The DARe framework is particularly noteworthy for its tailored approach, offering two distinct models: Startup DAO and Alpha DAO.

The Startup DAO model caters to emerging projects, accommodating organizations with fewer than 100 members. It aims to simplify regulatory processes, allowing new ventures to focus on growth and development within a flexible legal environment. In contrast, the Alpha DAO model targets more mature DAOs with treasuries exceeding $1 million. Specifically, it provides them with the necessary support to scale their operations efficiently.

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Dr. Sameer Al Ansari, CEO of RAK DAO, articulated the importance of this new regime. He also highlighted essential features such as the provision of a separate legal identity and limited liability for founders, contributors, and members. Similarly, Luc Froehlich, Chief Commercial Officer of RAK DAO, echoed Al Ansari’s sentiments.

“The introduction of DARe represents a stepping stone in our journey towards building a global hub for the blockchain and digital assets ecosystem. By offering a structured legal framework, we enable DAOs to interact with the off-chain world, such as opening a bank account and owning both on- and off-chain assets. This legal wrapper will also allow DAOs to signal and raise their credibility amongst peers, members, and investors,” Froehlich added.

Taken together and combined with the specific legal clarity and tax optimization, this development reflects the UAE’s and RAK DAO’s commitment to embracing novel technologies and fostering the blockchain ecosystem.

UAE as a Leading Destination for Crypto Firms

As the global space for digital assets continues to grow, the DARe framework positions the UAE as a leading destination for crypto-related ventures. The regulatory clarity and support provided through DARe could attract startups. Nevertheless, it would also set a new benchmark for other jurisdictions around the world.

Comparatively, while the UAE is advancing its regulatory frameworks to encourage Web3 and digital asset innovation, Italy has recently made headlines for its capital gains tax on cryptocurrencies, which could deter investment in this growing sector. Italy’s approach, focusing on taxation rather than fostering innovation, contrasts sharply with the UAE’s proactive stance in establishing supportive regulatory frameworks. This comparison highlights the differing priorities of these two nations.

In the UAE, the emphasis is on attracting and nurturing blockchain ventures, whereas Italy’s tax policies may complicate the sector for digital asset companies. This could limit their growth and development by inspiring “capital flight.”

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Moreover, recent legal changes from Dubai’s Virtual Asset Regulatory Authority (VARA) highlight the UAE’s focus on creating a favorable regulatory environment for virtual assets. These changes are poised to enhance operational frameworks for digital asset companies, further cementing the UAE’s commitment to becoming a global leader in blockchain innovation.