Hong Kong lawmaker Johnny Ng has called on the city’s government to take a pivotal moment in moving forward with enhancing the Web3 investment landscape by sealing a legal framework for decentralized autonomous organizations (DAOs).
According to the report, Ng’s suggestion comes after the landmark verdict of the High Court of Hong Kong which obliged a HK$6 billion blockchain project to disclose its financial records. This ruling shows the importance of the sector for regulatory clarity.
Ng pointed out that if the government set up explicit laws for the decentralized autonomous organizations (DAOs), it could boost the trust of the investors and entice the global people and money to come to Hong Kong.
A DAO is structured in such a way that every participant is involved in the decision-making process through voting on the blockchain, making its governance very distinctive and sometimes difficult to grasp.
Ng stated:
I hope the government can improve the ecology of Web3 and regulate DAOs legally so that more people in the industry will come to Hong Kong to develop their projects and bring in capital and talent. It can be an important part of pursuing economic growth.
DAO Case Reveals Challenges in Crypto Management
The push for more regulation comes after a very public court case about the MANTRA DAO project, which is in a dispute over who owns and manages it. The case, which included the Malaysian company RioDeFi, has exposed the complications and difficulties of operating DAOs without precise legal regulations.
RioDeFi, claiming to be the project’s founder, alleged that its management team made withdrawals from the cryptocurrency account without any explanation and did not report the correct information.
The High Court had previously mandated MANTRA DAO to reveal its financial records, highlighting the existing legal system’s lack of experience with cryptocurrency-related cases. The court’s decision, issued last week, said that although decentralized autonomous organizations (DAOs) are a different type of entity, there is still a requirement for proper financial accounting, just like any other business.
According to Lawyer Monin Ung, after consultation with the applicants, it could be open to abuse in the absence of a regulatory framework. Ung noted that some states in the United States are already applying their regulations to DAOs and calling for financial accounting with annual reporting. She implores Hong Kong to consider financial accountability and protection measures for investors by doing likewise.
In response, this was well acknowledged by the Financial Services and the Treasury Bureau as there is no unanimous consensus over global regulation of decentralized autonomous organizations.
While the bureau declared close monitoring over related international developments, and decentralized autonomous organizations that fall into regulated financial activities would still be required to obtain an appropriate license and undertake requisite regulatory oversight.
Related Reading | KAVA Weekly Technical Analysis: Near ATL, Bullish Rally Or New Lows?