I am a Director with the Virginia Blockchain Council. We believe that it is important to have this BILL pass. We think that it is important to have legal structure and framework for DAOs. For several reasons. Guidelines for the structures to operate. This allows accountability and enforcement. Allows DOAs to be recognized by the courts in dealing in contract s. Also there are great use cases needed for this structure including but not limited to underserved communities that can benefit by having access to DOAs for community-driven initiatives like managing public resources or funding social projects. We also believe that Virginia believes in innovation and keeping its citizen at the forefront of change and Giving the State a competitive edge. We support this BILL.

I am against this bill which aims to create a regulatory framework for decentralized autonomous organizations (DAOs) in Virginia. Regulatory Complexity: Introducing a new legal entity structure like DAOs adds complexity to Virginia's corporate law landscape. This could complicate the regulatory environment, making it harder for businesses and regulators to navigate, especially given the unique nature of DAOs which operate via blockchain technology and smart contracts. Legal Ambiguity: The integration of smart contracts into corporate governance introduces legal ambiguities. Smart contracts, being self-executing, might not align well with traditional legal frameworks, potentially leading to disputes over interpretation, enforcement, and liability that current laws are not equipped to handle. Security and Fraud Risks: DAOs, due to their decentralized nature, are susceptible to security breaches and fraud, as seen in past incidents like The DAO hack. The regulatory framework might not sufficiently address these risks, leaving investors and participants vulnerable without clear legal recourse. Member Rights and Responsibilities: The bill's provisions on member rights within DAOs could be challenging to enforce in a decentralized setting where traditional corporate governance structures do not apply, potentially leading to confusion over accountability, decision-making, and profit distribution. Dissolution Challenges: The process for dissolving a DAO, as outlined, might not account for the technical challenges of unwinding blockchain-based entities, where assets might be locked in smart contracts or distributed across a global network, complicating asset recovery and closure. Innovation vs. Regulation: While DAOs represent innovation in corporate structures, premature or overly rigid regulation could stifle this innovation. The technology and operational models of DAOs are still evolving, and a fixed legal framework might not adapt well to future developments. Delayed Effective Date: The delay until January 1, 2026, might seem beneficial for preparation, but it could also mean that by the time the framework is implemented, the technology or market dynamics of DAOs might have significantly changed, rendering parts of the regulation obsolete or inadequate. Global Nature of DAOs: DAOs often operate on a global scale, and state-specific regulations might not effectively govern entities that can exist and operate outside traditional jurisdictional boundaries, potentially reducing the effectiveness of Virginia's regulatory oversight. Precedent for Other States: By being one of the first to regulate DAOs, Virginia might set a precedent that other states follow, potentially leading to a patchwork of state laws that could complicate the operation of DAOs across the U.S., affecting their scalability and interoperability. I oppose this legislation due to concerns over regulatory complexity, legal ambiguity, security risks, the challenge of defining member rights in a decentralized context, dissolution issues, the balance between innovation and regulation, potential obsolescence, the global nature of DAOs, and the precedent it might set for other jurisdictions. A more cautious, flexible approach allowing for the evolution of both technology and law might be more appropriate.