All DAOs Will Have to Be Registered If This Crypto Draft Bill Sails

The crypto draft bill authored by Cynthia Lummis, the Senator from Wyoming, will require Decentralized Autonomous Organizations (DAOs) created by U.S. individuals to be registered and recognized by applicable law.

pic.twitter.com/vpt7MzlzWr

— slam (@bot_slam) June 7, 2022

Overall, the content of the crypto draft bill has stirred mixed reactions. While some say the bill is positive, most have responded to its effect on DAO’s governance and the requirement for registration.

Adam Cochran, a professor of Information Science and Business analysis, has also expressed his thoughts on the controversial bill in a Twitter thread he made earlier today.

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Wow, so first read some good stuff that moves us forward, but a lot of rough stuff.

Overall this gives US crypto clarity but it will have a huge cost and growing pains.

Here's what I noticed in the first read. https://t.co/Cb1TM0DVJs

— Adam Cochran (adamscochran.eth) (@adamscochran) June 7, 2022

Adam believes that the bill will bring clarity to the space. However, it will come with consequences primarily for altcoins which make up about 99 percent of the crypto market.

Another user chimed in about the intended developments should the bill be made law.

Some takeaways from the Sen. Lummis bill.

I am not a lawyer, NFA.

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1/? https://t.co/TpqVLoibDV

— 0xlmeow (@0xlmeow) June 7, 2022

He pointed out a fact that negates the popular opinion that miners will be free from taxation. Furthermore, he said that the bill issues guidelines that may impact crypto taxation.

What the U.S.Crypto Draft Bill Entails

Information provided in the crypto bill covers regulatory compliance, security, and disclosure laws. However, it will also offer more precise definitions of crypto terms.

Specifically, the bill states that smart contracts-guided DAOs, crypto exchanges, and stablecoin issuers must become registered or be subject to taxes. Furthermore, stablecoins tracking fiat currencies must have 100 percent collateral. From a neutral’s view, this could limit the rise of algorithmic stablecoin and even prevent catastrophic failures like UST.

With clarity, the bill provides the U.S. CFTC the power to classify digital assets as commodities. At the same time, it shall empower the SEC to intervene should a digital asset be classified as an investment contract.

Moreover, the crypto bill has a clause that states that in the case of crypto debts, profit revenue, equity, or dividend, the underlying asset will not be classified as a digital asset commodity.

While this might be a good move, it undermines the tenets of decentralization and impacts the operations of most DAOs. Technically, DAOs are community-driven and rely on smart contracts. Its governance is autonomous and third parties cannot influence processes. Furthermore, requirements to register will wash away decentralization and weaken privacy.