Finnish Minister Calls for EU Law to Recognize DAOs

Brussels must act to enable smart contracts to take off across the bloc, communications minister Timo Harakka said.

AccessTimeIconJan 17, 2023 at 11:06 p.m. UTC
Updated Jan 18, 2023 at 3:08 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

DAVOS, Switzerland — The European Union should consider legislation to recognize decentralized autonomous organizations (DAO) that govern Web3 applications, Finland’s communications minister said during a panel at this year's World Economic Forum.

The move could prevent having to alter thousands of laws or countries undercutting each other in the race to attract innovative business, Timo Harakka said.

“There are a lot of new players and actors in the Web3 world … not reflected very well in existing legislation,” he said. “Take a DAO for instance: Where does legislation stand?”

Harakka told CoinDesk new centralized laws could prevent a shattering of Europe’s legal codes – but that the European Commission, responsible for proposing new EU laws, had its eye on other matters.

Harakka said that "thinking on a multinational level” is needed to avoid “harmful regulatory competition” among the bloc’s 27 members, and prevent having to individually alter thousands of different laws regulating different kinds of contracts. The approach is reminiscent of the EU’s Markets in Crypto Assets (MiCA) legislation, which will create a uniform standard for each country if it is adopted.

“We are relying on the European Commission to be the initiator” and are “eagerly looking forward to its work,” he told CoinDesk – but said he was in the dark about whether it will be covered by a forthcoming policy paper on the metaverse, due in the spring.

“In DAOs it’s a different logic” to regulating corporations with named officers in charge, Harakka told CoinDesk. “Who’s responsible for transgressions?”

Europe had been “obsessed” with other issues like how to control privacy online, he said, but added that “remarkable and groundbreaking legislation will usher in the way to Web3” – a nod to recent and ongoing EU initiatives such as laws on online privacy, information flows and online market dominance.

But so far, he added, “I’m not sure we’ve seen a lot of thinking on Web3.”

Regulators across the world are struggling with how to classify and regulate decentralized initiatives such as financial applications in which there's no central lender. Some have argued decentralization is a myth, as in practice there's always someone in control; in the U.K., the Law Commission of England and Wales has published a consultation on how to deal with issues of structure, governance and taxation.

While some policymakers have argued it may be too early to get set rules for decentralized finance – and largely left the topic out of the EU’s landmark MiCA law – Harakka argued it’s time to start at least thinking about a philosophical approach to the issue.

It took two decades for the bloc to figure out how to regulate online data flows, he noted, and regulating smart contracts “could take a while as well.”

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.