full image - Repost: A DAO Framework for a CeFi - DeFi Crowdfunding Portal (from Reddit.com, A DAO Framework for a CeFi - DeFi Crowdfunding Portal)
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Regulatory-Compliant DAO Framework for CrowdfundingThis is in continuation of my previous posts on the same topic.I'm thinking of something similar to Apache Foundation when I think of a DAO framework for a regulatory-compliant DAO-governed crowdfunding portal. I'll discuss that framework in my future posts.In this post, I wanted to outline the launch and creation of the initial DAO (A) and how it will sponsor additional DAOs, which are necessary for the operations of a "regulated" crowdfunding portal ecosystem. Nothing like this has ever been done. But that does not mean it shouldn't be attempted and that does not mean it cannot be done.We are envisaging a DAO-governed, open source, fully transparent and "regulated" crowdfunding portal. We also need to remember that SEC is certain to audit such a crowdfunding portal during the first year of its inception.The process will start with the incorporation of a Delaware LLC. An LLC is the most flexible form of organization, which is governed by members based on an operating agreement. For this purpose, an attorney will need to design an operating agreement, which will have to define the following:A management team that will be elected annually by members.Removal of a management team.Decisions which require member votes vs. decisions which can be made by the management team with voting.A framework for decision-making (probably based on the Roberts Rules of Order).A method for admittance of new members after KYC/AML.Transparency requirements, inspection of offchain books of records by members.Methods for maintaining privacy of privileged information of members (e.g., tax ids, social security numbers, etc.)Other governance procedures, dissolution, succession, etc.Disallow absolute majority ownership by any single person.Set maximum ownership by any single person at 10%.Non-controlling cooperative (but no collusion) relationships with DAO (B) and DAO (C)After an operating agreement has been prepared, the terms of the operating agreement will have to be coded into an onchain DAO contract. It may not be possible to keep all activities onchain. For example, KYC/AML will require private information. However, it should be possible to setup an oracle, which will seek identification information from members, confirm their KYC/AML information through a provider and connect that information to a wallet owned by the member. In the future, the member will have to prove the ownership of their wallet to validate their KYC/AML status.After this initial DAO (A) has been created, it will create a Special Purpose Vehicle (SPV) under Rule 3a-9 of SEC Reg CF. This is just bureaucratic stuff to avoid registration with the SEC. If the DAO (A) has a large number of members, it will have to get registered with the SEC under Section 12(g) of the Exchange Act. Rule 3a-9 will help us avoid that scenario.Next, the DAO (A) and the SPV can co-issue tokens as membership interests and sell them to the public under Reg CF to raise up to $5 million. Investments will be made in a stablecoin (e.g., USDC to avoid the headache of converting crypto into US dollars for accounting, since SEC rules are based on US dollars) and transferred into an onchain multi-sig wallet.For the initial fundraise, the question will be which funding portal to use. This will be a governance decision to be taken by the initial group of founding members. We can ignore the question for now.After the funds have been raised, DAO (A) members will need to launch DAO (B) and DAO (C) as independent entities for transfer agent and escrow services. Why? The reason is that they will not be able to find a transfer agent that will be completely onchain. Similarly, there is no escrow agent who will provide 100% onchain escrow services as of February of 2023. As a result a cooperative onchain ecosystem for crowdfunding portal will have to created.Later, a marketplace for trading of crowdfunded securities will have to be created as DAO (C). However, that is not needed initially. So, will discuss that at a later date.This is a long post but it is still high-level. As they say, the devil is in the details. We will eventually get into the details to find and slay the devil.More to come. Enjoy the rest of your weekend.Love and peace.
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