The Digital Agency of Japan says it has created a decentralized autonomous organization (DAO) to study its operations and the wider Web 3.0 ecosystem.
The move stems from the meeting of the Digital Agency on November 3, in which it pledged to use its newly created DAO to scrutinize its “functions and roles.” By the end of the study, the Digital Agency of Japan notes that it may consider bestowing legal status to DAO if they meet the requirements.
The body is anchoring its decision on a Wyoming legislation that conferred legal status on a DAO, recognizing it as a legal entity in a trailblazing move. Granting legal status to DAOs in Japan faces legal and economic uncertainty given their novel nature, but Japan’s friendly policy towards distributed ledger technology (DLT) could see the move scale the hurdles.
The Digital Agency adds that it seeks to prevent the misuse of DAOs by bad actors that can deploy them for “cross-border crimes that exploit blockchain technology.” The Digital Agency will carry out a careful analysis of the benefits and challenges of DAOs through its own DAO.
“In regards to services and tools discussed in connection with Web 3.0 including crypto assets, DeFi, NFTs, DAOs, and the metaverse, each has benefits and risks,” the statement read. “There are various problems to be addressed.”
DAOs are organizations created using DLT with its guiding principles encoded into it, allowing it to operate without the need for managers or directors. In 2016, a loophole in the code of The DAO, a decentralized version of Airbnb, was exploited by hackers in a move that saw them steal $50 million worth of Ethereum.
In recent times, DAOs have made a resurgence, with ConstitutionDAO famously coming within a hair’s breadth of purchasing a rare copy of the U.S. Constitution.
Japan is pro-digital assets but is treading carefully
Japan ranks highly amongst its peers in the Far East in terms of digital asset adoption, with the government launching a nationwide policy to develop and expand the Web 3.0 environment.
The plan was contained in the “Basic Policy on Economic and Fiscal Management and Reform 2022,” which places the development of the digital economy as a top priority. Regional governments in Japan have used NFTs to reward high-performing mayors amid a steady rise in the number of digital asset users.
Although it is focused on growth, Japan is proceeding with caution to prevent a proliferation of bad actors in the ecosystem.
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