Speaking at the Australian Blockchain Week 2022 conference last month, senator Andrew Bragg called for urgent regulation of decentralized autonomous organizations (DAOs) under the nation’s Corporations Act. The regulation would form part of his Digital Services Act proposal.
If it were to be written into law, Australia would become the first country in the world to recognise DAOs at a federal level.
Bragg’s reasoning for this legislation is that he believes it will make Australia one of the only jurisdictions confronting this issue head-on. He stated:
“Decentralized autonomous organizations can replace companies. It might be the most significant development since the first joint-stock companies floated on the Amsterdam stock exchange in 1602. If that doesn’t make policymakers listen, perhaps this will. Given that DAOs are recognized as partnerships, not companies, they are not liable to pay company tax. Company tax accounted for 17.1% of total commonwealth government revenue. Our reliance on company income tax is unsustainable”.
“DAOs are an existential threat to the tax base and they must be recognized and regulated as a matter of urgency”.
Australia’s select committee has thus recommended that DAOs be brought under the fold of the Corporations Act, providing for standards of corporate governance and corporate personality.
Last year, a report handed down by the senate committee recommended that the government introduce new legislation to establish a DAO company structure.
A DAO is a software running on a blockchain that offers users a built-in model for the collective management of a community. As an open source protocol, it is governed by a set of rules and is created by its elected members, with the added benefit of automatically executing certain actions without the need for intermediaries.
By the end of 2022, the Australian government is expected to receive a report on digital asset taxation that will help it to examine the regulation of DAOs.
Australian Treasurer Josh Frydenberg has also confirmed the nation’s ambitions to embrace cryptocurrency developments in December 2022 as part of broader reforms to the country’s payments sector.
More specifically, the minister for digital economy and Liberal party senator Jane Hume has said that the government is looking to potentially introduce a new licensing regime that will provide cryptocurrency exchanges with a “badge of approval” and introduce custody requirements.