Hello, ssv.network DAO community!
We’re excited to provide an update on the progress of the DAO Foundation Incorporation. The ad-hoc working group has been busy researching and evaluating potential jurisdictions for our DAO, and we’re happy to share our findings with you today.
Recap
On March 7th, 2023, the proposal to incorporate a ssv.network DAO Foundation successfully passed the snapshot voting.
Per the snapshot vote, an ad-hoc working group has been tasked with analyzing the current situation and confirming the Caymans as the jurisdiction of choice. Additionally, the working group was asked to submit a proposal to the DAO within no more than 60 days of the approval of this proposal. Today, we present you with our findings and recommendations.
Research and Shortlisting
Although the original proposal suggested the Cayman Islands as the jurisdiction of choice, the ad-hoc working group wanted to take advantage of every opportunity and important trend, both from the perspective of target jurisdiction and legal structure.
To start, we developed a research document considering a range of potential jurisdictions. Then, we evaluated each jurisdiction based on factors such as regulatory environment, legal framework, taxation, and reputation within the industry. Finally, after careful consideration, we narrowed our search to three jurisdictions: the Cayman Islands, Gibraltar, and Switzerland.
Candidate Interviews
After shortlisting, we conducted a series of direct interviews with lawyers and service providers in each jurisdiction to understand the regulatory and legal environment better. These interviews helped us gain insights into the nuances and challenges of each jurisdiction, as well as the potential benefits of setting up our DAO Foundation there.
List of Interview partners:
- Carey Olsen, Cayman Islands
- Hassans International Law Firm Limited, Gibraltar
- Bonnard Lawson Geneva Area Ltd, Switzerland
SWAT Analysis
After completing our interviews and compiling our research, we conducted a SWAT comparison of all three jurisdictions. This analysis helped us better understand each jurisdiction’s strengths, weaknesses, opportunities, and threats.
The results of our analysis are as follows and presented to you in short form:
| Strength | Opportunities | |
|---|---|---|
| Caymans | - Requires no identified members, thus avoiding centralization and liabilities - Allows bounding the foundation to any decision made by the DAO - Lots of expertise and support for the day-to-day operation |
- Agile setup and structure. It allows us to revisit the choices at any time. |
| Gibraltar | - Same as the Cayman Islands | - Actively developing and trying to settle the crypto industry |
| Switzerland | -Explicit pro-crypto jurisdiction, holding that status for quite a while now. | - Great political stability - Better image and reputation - Pro-crypto regulation and the power to maintain it if the regulatory regime change in the EU/US |
| Weaknesses | Threats | |
|---|---|---|
| Caymans | - N/A | - Regulation could change if major players put some pressure, e.g., EU/US - Local companies may encounter operational difficulties in other jurisdictions |
| Gibraltar | - Less experience than the Caymans, but the same weaknesses | - Same as the Cayman Islands |
| Switzerland | - Associations need to have identified members; therefore, more centralized - Good, but very rigid structure - Higher costs of incorporation and maintenance - No clear legal protection advantage |
- Liability concerns for identified members |
Wrap up:
Cayman Islands: The Cayman Islands is the industry standard for DAO Foundations, with a well-established regulatory framework and a favorable tax regime. In addition, its reputation as a financial hub and its track record of successful DAO Foundation launches make it the strongest candidate for hosting our DAO.
Gibraltar: Gibraltar offers a competitive tax regime and a modern regulatory framework that is conducive to cryptocurrency and blockchain-based companies. However, its small size and relatively untested legal framework make it a less attractive option compared to the Cayman Islands.
Switzerland: Switzerland has a well-established reputation for financial stability and innovation, and its regulatory framework is favorable for cryptocurrency companies. However, the country’s high cost and complex legal system in terms of decentralization make it a more challenging option than the Cayman Islands.
Decision
After carefully considering the above research, we suggest moving forward with the Cayman Islands as the jurisdiction for our DAO Foundation.
We believe that the Cayman Islands’ regulatory environment, track record, and reputation within the industry make it the best choice for our community. The working group suggests reconvening a similar committee a year from today to revisit the decision.
As mentioned in our comparison, it is worth noting that Gibraltar offers similar opportunities, and Switzerland has an interesting approach too. All jurisdictions would have been a feasible option, but the majority of the working group voted for the Cayman Islands, where Switzerland received the remaining votes.
Next Steps
The Cayman Islands has abundant local talent who can set up DAO foundations. These should allow ease of incorporation and operations. We’ll work closely with our legal partners to set up our DAO in the Cayman Islands.
Based on the above decision and under the assumption that the community supports the choice, the working group has already started to work on the following items:
- Select a legal firm for the Foundation to engage with.
- Draft the foundation’s constitutional documents.
- Identify and engage local service provider(s).
(to act as registered office/directors/supervisor)
The working group contracted the Lawfirm Carey Olsen to help us with the process. Since the law firm requires a legal entity to sign an engagement letter and to pay its fees until the Foundation is incorporated, we have unanimously empowered Blox, with its consent, to sign such a letter and to pay the fees up to the cost approved by the DAO for this ad-hoc working group. This empowerment is valid for this short transitional phase due to the above-mentioned technical requirement and shall expire upon the incorporation of the Foundation and its ability to sign an agreement and pay the fees. At that moment, Blox shall terminate its respective engagement with the law firm.
Subject to applicable laws and with respect to the legal services required for the incorporation of the Foundation, Blox shall act as instructed by the DAO or the working group mandated by the DAO. Accordingly, the DAO shall cover such legal fees paid by Blox that are related to the incorporation of the Foundation subject to a unanimous approval of the working group (omitting Blox’s vote). Upon the incorporation of the Foundation, all rights and obligations related to this transitional stage shall be assigned to the Foundation. Blox will not be a member of the Foundation, nor will it play any role in it other than those roles the DAO may approve in the future, similarly to any other third party.
The ad-hoc working group will provide more details about the incorporation once the first batch of agreements is ready in the next coming weeks. Thank you for your continued support of the SSV.Network DAO.
Best regards,
The DAO Foundation Working Group