Legal Risks and Mitigation Strategies

Operating a DAO, especially under an innovative legal structure, presents certain legal risks. These risks have been carefully assessed by the Cathedral Foundation DAO, and mitigation strategies are implemented to ensure compliance and legal protection for both the DAO and its members.

Regulatory Uncertainty

While Estonia has a clear and supportive legal framework for blockchain technology and DAOs, the broader international regulatory environment is still evolving. There is a possibility that regulatory bodies in other jurisdictions may introduce new laws or restrictions on DAOs, particularly concerning issues such as anti-money laundering (AML) and know-your-customer (KYC) requirements.

• Mitigation: The Cathedral Foundation DAO complies with Estonia’s stringent AML/KYC regulations, which align with European Union standards. All participants involved in fundraising activities, governance processes, or financial transactions are required to undergo verification. The DAO continually monitors international regulatory developments and adjusts its compliance procedures accordingly, ensuring alignment with emerging legal requirements while safeguarding the DAO’s operations across different jurisdictions.

Legal Liability of DAO Members

A potential risk for DAO participants is personal liability. Since members participate in decision-making through decentralized governance, there could be concerns that individuals might be held legally accountable for decisions made by the DAO.

• Mitigation: The Cathedral Foundation DAO limits the liability of its members by utilizing the legal framework available in Estonia, which provides legal protections for nonprofit entities like the DAO. As a legally registered entity in Estonia, the DAO shields individual members from personal liability for actions taken under the DAO’s governance. Additionally, the DAO follows clear governance protocols to ensure that all decisions align with the organization’s mission and legal obligations, further reducing the risk of individual liability.

Data Privacy and Protection

Data privacy and security are crucial in the decentralized environment of the Cathedral Foundation DAO. Protecting member data, voting records, and financial transactions from unauthorized access is essential for maintaining trust and regulatory compliance.

• Mitigation: The Cathedral Foundation DAO adheres to the EU General Data Protection Regulation (GDPR), which applies to all organizations operating within Estonia. The DAO uses advanced encryption and blockchain-based privacy mechanisms to ensure that member data is securely stored and accessible only by authorized individuals. All transactions and governance decisions are recorded on the blockchain, ensuring transparency and accountability while protecting the privacy of individual members. Additionally, the DAO regularly updates its security protocols to align with the latest best practices and regulatory requirements.