Reference - Select Committee on Blockchain, Financial Technology & Digital Information Technology

[tenfinney]

Select Committee on Blockchain, Financial Technology & Digital Information Technology-PM

July 2020 Blockchain Task Force Meeting Notes

https://www.youtube.com/watch?v=ASWzQoLqvWg
Taken by drllau
LexDAO member: 0x590d24003d5ec516502db08e01421ba56a5cd611

A TLDR summary of the 4.5-hour Task-Force (minutes into video =)

Jurisdictional Concerns

• 11m = digital identity (pluristic) and WY "residency" (no domicile test at moment) and application to "travel" rule (passport for mobile capital).
  - Citation:

Privacy Rights

• 25m = initial proposal for privacy rights xref Claire Sullivan (https://www.adelaide.edu.au/press/titles/digital-identity) starting from premise nobody compelled to share private key & evolving towards functional identity (rather than natural rights) which is defined around control aspects rather than ownership

Solving the Id problem with 0x Accounts

• 37m = CA/NL/NZ moving towards decentralised ID ... (WY trying to avoid the route CN heading) ... use case or implemented "practices"? maybe in state filing

Continuing Education and Verifiable Identities

• 42m - concern about (legal) continuing training which needs to be tied to natural person (not just agent, delegate, steward ... ) and possible abuse by authorities (cf Taiwan) whilst trying to attract custody banking service (talks with IBM/MS)

Connecting Identity to Verifiable Layers of Trust

• 55m - deployment of digital self sovereignty via WY driver's license = existing ID trust anchor (weak tie) -> master avatar + credentials (offchain) = segregated data by design (8 keys) which is sorta a deterministic hierarchical wallet ... claims transaction analysis stops at the certifier (masked-out) which can be switched out (can be traced if certifier agrees)

• 1:01 segmented data means expose just enough to verify ... eg proof of age on driverID cf one example mentioned turned into stalking by copying her address

The Anti-money-laundering Quandry

• 1:28 = headache about AML but talking with flexible solutions for local banks (not federal chartered) ... try to differentiate from other states. Catalin asked about non-banks ... answer most financial institutions and entry/exit points .. potential of weak links and thus ID theft as govt forced sensitive "data in motion" and 3rd party doctrine means data insecurity
  Third-party-doctrine: https://www.theatlantic.com/technology/archive/2013/12/what-you-need-to-know-about-the-third-party-doctrine/282721/
  • Citation:

Avoid the Taint when Accepting Altcoins

• 1:40m Financial Action Taskforce (not yet in US law) problem of "taint" in that if accept altcoins, a business is now responsible for obligations of travel rules. Consider a data "trust" with higher duties/oblgations
  • Citation:

DAOs Improved Coordination Activities

• 2:05 = DAOs as separate legal entity? (clarify law in traditional member's interest) Prof Aaron Wright prof in openlaw ... argue new ways to coordinate non-hierarchical activities. is WY becoming delaware of digital assets? Accepts DAO with no central boards/authority and member transparent in contributions (recorded in software, not enforced by legal strictures).

Protecting Individuals while Not Displacing Fiduciary Responsibilities

• 2:22 problems with LAOs in fixed operating agreement and waiving of fudiciary obligations ... more amorphous and reduce time/expense. DAOs designed to protect individuals ... reduce information asymmetries and decentralising controls
  • Citation:

Can Registered Agent Rulse be Modernized?

• 2:29m should DAOs have a new form of registered agent? (eg membership list) potentially related to data-trust and pay taxes on behalf of escrow without being considered money-transmitter. But not easy/cheap as common caselaw is not collected in single place ... ($30k to train a lawyer up to speed on LAOs)
  • Citation:

Paradigm Shift to Progammable Governance

• 2:35m programable governance is not just money, is going to be ground-breaking ... opportunity to attract global participation. Impediments ... risk of securities implications, state/IRS reporting, rights attached to membership tokens. LLC statute has some defaults but can customise operating agreement and avoid ambiguity of natural language.
  • Citations: https://www.irs.gov/government-entities/indian-tribal-governments/internal-revenue-code-sections
  • https://www.law.cornell.edu/uscode/text/26

Internal Standing for Code - "Millenials" Demand

• 2:50 need meeting of minds in IP, supplanting fudiciary duties of board to members, community bylaws rather than formal legal recognition. Code via smart contracts has internal standing ... strong demand and searching for non-traditional form. Skeptics assert that if you seek a "corporate" shield, you have to give up something. Advocates note millenials want creative peer relationships and not the traditional hierarchy.

Member Token Locks as a Solution to Traceability Concerns

• 3:08 - formal legal entities have a certain acceptance, business confidence beyond nebulous non-structure. Catalin notes groups trying to follow rules (deference to software) rather than subjective human "managers". Existing lawyers are not comfortable with this as traceability disappears (when/if membership tokens are transferable).

Using a Proper DAO as a Formally Recognized Operating Agreement

• 3:26 - nature of org is written in code, then legal recognition (as fallback) is supplementary. Should code be "filed" as operating agreement? Fractionalisaton of value? Point is not the token per se, but how it is used makes it a security. Also, very little cash is typically involved but time ... to what point is value created from participation and be treated fairly

Folow Existing Wyoming State LLC Statutes

• 3:45 probably 95% of what emerging DAOs want is already in WY LLC statutes but just needs a good map. Policy decision of how to treat from liability perspective (piercing corporate veil). LLC-lite? LimPartnership++? What legal assumptions need to be discarded? Points out advantage of L3C (Low-profit limited liability company) as framework to draw tech firms. Quarantining participants' other assets ... (personal time to remedy?)
  • Citation: https://en.wikipedia.org/wiki/Low-profit_limited_liability_company

LexDAO/LexxCorp as a First-Mover with Wyoming Legislature

• 4:03 - want to use live case example (from PoV of lawyer). What are characteristic of DOA that need the 5% extra? Narrow scope of discussions to reduce committee time. What has to be clarified? WY trying to be meaningful first mover in how web3 software needs to be packaged?

Public comments

• 4:13 Public comments + mismash

Local Registered agents re-education

• ... Registered local agent fundamental obstacle (lack of general awareness).

Special Purpose Despository Institution (SPDI) Opportunities

Use of Special Purpose Despository Institution (SPDI) structure (pitch to state O&G industry) tokenised in underlying commodities business.

Altcoins accepted as Payment for Legal Services - FINCEN Reporting Requirements Kick-In

Can local attorneys accept altcoins as payment? (write to bar for legal opinion) = one view is barter any commodity & property is perfectly acceptable & ethical (but 10k limit for FinCEN reporting).

Follow-up for LexGroups

Follow-up LexDAO to consider submission on remaining 5% of legislation https://discord.gg/gBfxAV on #raid-smart-co channel after discussing with other DAOs what legal scaffolding they need.