Hong Kong Legislator Urges Government to Regulate DAO to Lure Web3 Talent

Johnny Ng Kit-Chong, a legislator in Hong Kong, is pushing the government to regulate Decentralized Autonomous Organizations (DAOs) as a way of enhancing and growing the Web3 ecosystem. This comes after a landmark court ruling where the Mantra DAO raised pertinent questions on the ownership, governance and transparency of these innovative entities.

According to Monin Ung, an attorney, the accountability of Mantra DAO declined significantly in January 2021 after RioDeFi, the plaintiff, hired people to manage the DAO project in August 2020. There were accusations of misappropriation of funds. The court ruling sets a precedent showing that DAOs are not outside the scope of existing legal frameworks. This will help Hong Kong establish itself as a leader in the global Web3 space, said Ng. He believes that having clear regulations will protect investors and appeal to talented individuals and investors.

At the moment, there is lack of clarity in how DAOs operate, which can put off Web3 developers and innovators, causing them to hesitate before setting up shop in Hong Kong. This is because they may not be sure of how the government will treat them or their businesses. For this reason, Ng is urging the government to step in and create a regulatory framework that makes these rules clear and encourages innovation.

In a recent report, Ng stated that he hopes the government can create a supportive environment and regulate DAOs legally. This approach will attract Web3 startups to Hong Kong, drawing in both capital and talent to develop their projects.

However, the call for DAO regulation is not new for Ng. The legislature has been vocal about having regulatory clarity, especially in all government sectors. Since July, he has been pushing for the government to embrace policies that support the development of ideal DAOs. Ng believes Hong Kong is becoming a global fintech hub, even as the city plans to implement stricter regulations for cryptocurrencies in the coming 18 months.

However, regulating DAOs can be tricky. On one hand, clear rules could allow developers to launch their projects confidently in Hong Kong. On the flip side, overly restrictive regulations could end up choking the very growth and creativity the government aims to foster. That’s why finding the right balance will be crucial.

Ultimately, the push for DAO regulations is about securing Hong Kong’s future as a financial and technological powerhouse. Having a clear legal framework will establish the city as a global standard for how DAOs operate, encouraging other jurisdictions to follow a similar path.

Jurisdictions such as the United States could also greatly benefit from establishing a clear regulatory framework for Web3, so that industry players can operate in an environment that allows them to focus on coming up with the best innovations that entities such as Horizon Fintex can quickly take up to boost their business operations.

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