The Tribune

By FAY SIMMONS

Tribune Business Reporter

jsimmons@tribunemedia.net

The Bahamas’s bid to regulate decentralised autonomous organisations (DAOs) through new legislation could be a global regulatory first, the Attorney General has asserted.

Ryan Pinder KC, speaking at the Society of Trust and Estate Practioners (STEP) Bahamas conference, said the proposed Decentralised Autonomous Organisations Bill tabled in Parliament last week aims to create a legal structure for blockchain-based organisations that operate using smart contracts.

He said the Bill is a part of a series of reforms the Government hopes to pass in the coming months as it both seeks to strengthen regulatory compliance and expand The Bahamas’ financial services product offering and competitiveness.

“The third piece we are moving forward with is in the FinTech (financial technology) space - the Decentralised Autonomous Organisations Bill,” said Mr Pinder. “A DAO is effectively.. I'll call it an entity, although they claim it is not, an organisation that is managed over the blockchain using smart contracts.”

He explained that such structures allow investors or participants to make decisions through blockchain-based governance mechanisms. “For example, if you were an investor through this vehicle, all the investors could have input through the blockchain, through smart contracts, on what that vehicle does,” the Attorney General added.

Mr Pinder said the Government believes the concept has matured enough to justify a formal legislative framework and is now putting it forward for use by financial institutions. “This is the first attempt, I think, anywhere in the world to put a regulatory framework around a DAO,” said Mr Pinder. 

“We think that structure is now mature enough, and used enough, that putting a legislative framework around it will help legitimise it and allow it to have more common uses within financial institutions.”

The Government has also tabled the Usufruct Interest Bill, legislation aimed at expanding The Bahamas’ financial services offering by introducing a concept widely used in civil law jurisdictions.

Mr Pinder said the structure, known as usufruct, is common in countries such as Brazil, Panama and Switzerland, and is also frequently used in France. “Think of it in a context similar to a life estate in common law,” said Mr Pinder. “I may give you the economic benefits of an asset, but you do not have full ownership of that asset.”

He explained that the concept is commonly used for estate planning and can provide certain tax and succession planning advantages in civil law jurisdictions. Mr Pinder added that the legislation was developed with input from industry participants in Europe, The Bahamas and Latin America.

“We had industry participants from Europe, from The Bahamas and from Latin American countries to help us develop it, and it is a very comprehensive piece of legislation now before Parliament,” said Mr Pinder.