Utah State Legislature has passed the Utah DAO Act HB 357, commonly known as the Utah Decentralized Autonomous Organizations (DAOs) therefore granting DAOs legal recognition and limited liability protections in the state.
This new law frames DAOs as “Utah LLDs,” giving them limited responsibility and legal legitimacy. The Digital Innovation Taskforce and the Utah Blockchain Legislature worked together to create the Act.
On March 1, 2023, the Utah DAO Act was approved after being reviewed by committees in the Senate and the House. Bylaws are used to guarantee DAO-compliant privacy and determine who owns DAOs. To guarantee distinct differences in tax treatment and modernized DAO features, quality assurance DAO protocols are also introduced.
Blockchain and digital asset tax advisor Joni Pirovich, who works with the DIT, tweeted:
“This is a huge step for DAO innovation as the Act is based on the @coalaglobal DAO Model Law, and will become effective from January 2024.”
The DAO Model Law aims to give DAO innovation the maximum flexibility possible, acknowledging that DAOs are global entities and can offer technological guarantees comparable to the protections that laws seek to provide by requiring manual reporting methods.
The Utah Blockchain Legislature had some significant concerns, thus compromises were made in order to enact the Act. An agreement that required DAOs to reveal an incorporator while still keeping their anonymity addressed one worry about the anonymity and unaccountability of DAOs.
A compatible tax wording was then submitted by the Utah Tax Commissioner’s office after the Utah Blockchain Legislature determined that the previous tax language utilized was incompatible with federal and state tax reality.
Last but not least, there was a concern regarding the Utah Division of Companies’ inability to process additional applications due to a lack of ramp-up time. The bill’s implementation date was moved up to 2024 to allay this worry, giving more time to modify and revise actual implementations of the legislation.
A comparable DAO Act, which recognized DAOs as limited liability organizations and mandated the formal adoption of the DAO structure among the state’s legal units, was adopted by the Department of Marshal Islands last year.
