Co-regulation, not Red-Flag laws

Coordinate - Considerate (careful thought) - Collaborate

1. Network of members, local lead
2. Hackathon on open submission
3. Policy repo to compare

LexDAO previously crowd-sourced internally and submitted to govt (US Senate Banking, Wyoming DAO amendments, SEC). We aim to extend this experience globally (SDG 9) for other communities as part of wider mission of justice for all (SDG 16) and democratisation of finance (SDG 8).

[IMPACT]

LexDAO proposes to leverage our existing body of thought leaders to collaborate with the Cardano community to identify, focus, and ideate solutions to existing policy problems facing crypto adoption. We are a DAO of crypto-lawyers, advocates, and ex-regulatory experts who on a daily basis help promote the creation of favorable solutions that comply with laws and regulations throughout the world. To lobby for favorable legislation, we propose to:

• SENSE: Cardano community to nominate public submissions opportunities (legislative, regulatory, industry), LexDAO then selects a legal engineer to coordinate a formal proposal (eg co-regulation or factual-briefs) within that country. That coordinator will draw in necessary tax, jurisprudence, regulatory, etc expertise as needed whilst polling affected Cardano subDAOs as to priorities/preferences. By fostering internal consensus first, we can then draw in industry partners or infuencers based on grounded principles (eg property rights or ESG goals) rather than arbitrary wish-list.

• ANALYSE: We frame the debate (freedom of association, privity of contract, differential privacy) to identify the public policy mechanisms (protective, preventative, punitive) and triage legislative rules that are detrimental to the success of Cardano ecosystem. Building from repo of comparative law (what works in other countries) we will analyse options ranging from factual findings to accounting clarity (definition of tax events) to specific legislative language.

• RESPOND: Conduct a hackathon of business interests, regulatory observers, and legal engineering professionals to aggregate and condense the analysis into specific policies, proposals or provisions. Partner with networks such as LexPunK army, Proof of Stake Alliance, or PAC DAO to widely publicise and promote grass-root support for outreach initiatives.

This implements the 3 phases (above) of coordinate -> considerate -> collaborate. The impact of collaboration is to spread the good policy ideas (from other jurisdictions) to the grass-root level of the new country, allowing to learn from the lobbying experience elsewhere. Translation of prior policies results in a massive saving of hundreds of expert hours compared with crafting policies from scratch. The repo from each hackathon will be open-policy so available for any Cardano community to spread public awareness based on rational policy (eg UK digital assets definitions).

To illustrate our impact, we have attached 3 examples of our lobbying in helping community members, state governments, and federal committees to understand the amazing opportunities in the blockchain space. LexDAO has a proven record spanning the last three years of thought leadership within the crypto space, and with this grant we can expand and align our work with the needs of the Cardano community.

We believe in a rational discourse to emphasise positive aspects of crypto-assets and illustrate novel features of proof-of-stake (eg social capital in functional electoral colleges). Directly lobbying is a zero-sum game that incumbent TradFi has the advantage. Instead of a shot-gun approach, we attempt a sniper rifle by focusing on 3 broad principles:

1. Freedom of Association - acceptance of new organisational forms such as DAOs;
2. Privity of Contract - members should be able to negotiate and exchange obligations of own volition; (provided not criminal in nature)
3. Differential Privacy - quiet enjoyment of crypto-assets free from unnecessary intrusion so long as all applicable laws are followed.

This combination translates to voting with your wallet, with netizens migrating to DAOs which best suit their purpose and has favorable tokenomics. Differential privacy means data collection no more intrusive than a census (down to post-code level but not individual household) which support public policy for aggregate data but without compromising individual privacy.

We believe our breadth of network (100+ members around world) combined with depth of experience (tax, securities, entity formation) along with the existing track record of submitting to regulatory bodies should give Cardano and other major crypto-currencies confidence that we can scale your initiatives to the global stage.

Incoherent coalition - lack of internal consensus

Inconsistent policy - different countries treatment

Incomprensible pitch - technical gobbygook deters grass-root advocation

The concern we have is that legislatures will pass Red-Flag laws, akin to burdensome conformance with TradFi (eg custodial accounts) without realizing the advantages of staking (behaviour economics), smart contracts (risk-free trust in code) and distributed ledger (auditable history).

By coordinating with stakeholders, we build concensus in the wider ecosystem as to desirable legislation. By running multiple hackathons, we will build up knowledge and factual basis for public policy. And coordinate a single response which communicates with policy-makers in plain language and where possible, factual evidence of the benefits of ecosystems such as Cardano.

[FEASIBILITY]

We have identified a number of public comment sessions that would seek the buy-in of pertinent Cardano sub-community to foster meeting/hackathon to crowd-source a response:

• Thai Securities and Exchange Commission

• SEC Alternative Trading Systems (Prof Vennet coordinator TBC) 1Q2022 (awaiting Federal Register)

• European Payments Council: Consultation Standardisation of Quick-Response (QR)-codes (no legal implications) 14 Apr 2022

• AU ACCC Review of Consumer Data Rights focusing on implementation of OpenBanking (CfP) 1st Apr 2022

• ISO/TEC 307 Blockchain and distributed ledger technologies Secretariat (Esen Esene TBC) Decentralized Identity standard for the identification of subjects and objects 3Q2022

• ISO/TEC 307 Blockchain and distributed ledger technologies Secretariat (Esen Esene TBC) Blockchain and distributed ledger technologies

• Texas DAO LLC 202?

• California DAO LLC 202?

• Parliamentary Select Committee on Australia as a Technology and Financial Centre: Possible DAO laws 2022?2023

• Various cryptocurrency bills

We plan to allocate ~$5-10k / hackathon (up to 20-30 public submissions totalling $150-200k) to

1. participation prizes (books, swag, social capital, etc) for co-regulation drafting ~40%
2. coordinator(s) time to getting submission finalised ~30%
3. bounties to improving the policy repo (comparative law), compiling resources (factual briefs), and language translations (if necessary) ~20%
4. Gas fees for PoAP, snail-mail, communications, meeting-room hire, PR, admin disbursement, etc

LexDAO is a non-profit guild of legal engineers with mission to research, develop and evangelize first-class legal methods and blockchain protocols that secure rules and promises with code rather than trust. Our membership includes web3 developers, crypto-lawyers, as well as thought leaders who believe that everyone deserves access to justice provided in a quick and efficient manner. Blockchain technology offers solutions to many problems in the legal space.

LexDAO has been operating since 2019, and our membership has grown to include both developer and legal communities. Our Discord has over 600 visitors interested in the work that we do, and the DAO itself has over 100 paying members for those actively working on LexDAO matters. Among our membership includes law professors studying smart contracts, lawyers with crypto law focused practices, as well as ex-government regulators with financial experience (e.g., SEC, CFTC, etc.), and law students across the globe.

We have active working groups on the areas of Dispute Resolution, Real World Asset dematerialization, and plurinational Legal Structures. Some of our projects have resulted in spinouts that are in active development (e.g., Kali DAO - an application to simplify DAO and legal formation and support agreement drafting).

We have also conducted legal engineering consultation calls with over 30 founders to collaborate with them to define their initial legal engineering needs for early DAO creation, clarify their legal status or property rights, and implement governance structures. Additionally we regularly host Twitter Spaces with panels of thought leaders to discuss recent events (e.g. discussing Biden’s recent Executive Order on federal regulations).

For this challenge, we build on our international membership base to select a (nearest) lead-coordinator for each country which is seeking public comment on forthcoming legislation. We have subject matter experts ranging from tax, securities, and international jurisprudence to draw upon as needed. We have a track record of public good in promoting crypto laws (eg French translation of the COALA Model DAO laws).

Read the sample public submissions attached (Wyoming Blockchain Committee, Senate Banking Committe, SEC rule-making) as evidence of the quality of work (internal LexDAO hackathons or individual member submissions).

[AUDITABILITY]

Number of Country public comment (forks of hackathon templates) % reaching final submission x population

Hackathon Participation Level (student - netizen - professional - regulator - legislator)

Mainstream media mention (communications outreach, trade industry engagement)

Adoption, Acceptance or Argument (debate) of co-regulation clauses by legislative/regulatory body.

The sniper rifle approach illustrates that success in one jurisdiction, along with the Freedom to Associate, means that DAOs will migrate to locations with the right mix of light touch and caselaw to establish precedents. A shotgun approach whilst flashy, means efforts tend to be scattered without an overall institution such as NGO.

We aim to improve the quality of debate and tie ideas to technical architecture (proof of stake). Differential privacy is example which compromises between useful public information (aggregate data) versus presumption of quiet enjoyment of private cryptoassets / tokens. With support from Cardano, we coordinate local coalitions to persuade regulators that co-regulation rather than top-down imposition of rules would be more likely to lead to compliance.

New proposal

SDG Rating

Goal 8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

Goal 9. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

Goal 16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

Financial inclusion, quiet enjoyment of property (crypto-assets), freedom of association,