A lawmaker in Hong Kong, Johnny Ng, has proposed that the government examine establishing a legal framework to control decentralized autonomous organizations (DAOs) to cut down the risk of Web3 instability and thus attract overseas talent and capital.
The report stated that Ng noted the case in which a court ruled that a DAO project. It had raised HK$6 billion and had to provide financial records. The government should make the most of this. The legislator believes that this is a chance for the administration to bring in rules for DAOs, which could thus attract more investors and turn Hong Kong into a global Web3 center.
Court’s ruling on DAO financial accountability
The High Court dispute was about who owned the MANTRA DAO project. One of the petitioners, a company called RioDeFi, asserted that it was the founder and hired two of the six defendants to manage the project in 2020. Last year, the court ruled that MANTRA DAO had to give the plaintiffs its financial documents.
Last week, the court published its reasoning for the ruling, which noted that Hong Kong and other jurisdictions had not been in the situation of dealing with disputes regarding cryptocurrency trading. The judge, nevertheless, refused the defendants’ arguments. It stated that they were obligated to maintain appropriate financial records for the DAO.
Lawyer Monin Ung, representing the plaintiffs, stated that the case demonstrates the need for DAOs to be financially accountable to their investors. She emphasized that DAOs could be abused without a regulatory framework. Additionally, urges the government to set rules on financial accounts, employment terms, and intellectual property protection.
Ung pointed out that some US states have already started rolling out DAO regulations. This includes stipulating financial accounting and annual account preparation requirements.
In fact, the government said that no global consensus has yet been reached on the regulation of DAOs. Nevertheless, the authorities will monitor the developments in the technology. The government further stated that any entity conducting regulated financial activities, even if it claims to be a DAO, would have to acquire the necessary licenses and approvals.
The Hong Kong government has earlier proposed plans to develop the virtual assets industry and promote the city as a crypto hub. Last year, it brought a new licensing regime for virtual asset service providers.
