UPDATE: Norton Rose Fulbright has completed their analysis, but under a restriction that it is only shared with members of the mutual. We have been investigating technical options to do this, in particular https://www.mintgate.io/
Mintgate are working on some minor updates to enable our particular use case, this will allow you to log in with a Nexus Mutual member address, sign a message and then download the advice. We will get this up as soon as we can.
In the meantime here is a high level summary of the advice, as interpreted by me:
Nexus Mutual can either move to an Alternative Legal Structure (transfer assets to another legal entity outside the UK) or to a “Stateless DAO”. Members seem primarily interested in the Stateless DAO structure, so summary will focus on this.
Risks in moving to a Stateless DAO
- Members will almost certainly lose the limited liability that comes with the existing legal structure, as it is very likely to be treated like a general partnership.
- Significantly increase in legal and regulatory uncertainty due to the lack of a specific jurisdiction.
- Regulators generally attach regulation to legal or natural persons and not technology, and may therefore attach regulation to those facilitating the Stateless DAO structure. To transition to a stateless DAO the mutuals assets have to be transferred to a natural or legal person and this person may acquire liability in relation to the Nexus Mutual Protocol.
- Increased liability risk for individuals/organisations that may be seen as influencing or controlling the Nexus Mutual protocol. In particular, members of the current Advisory Board or core team and potential enforcement actions by regulatory authorities.
- Increased risk of speculative claims (in the legal sense not the insurance sense) where third parties or token holders have suffered a loss and are seeking to claim against those with the deepest pockets / most material holdings.
- AML/KYC is practically impossible to implement in a Stateless DAO structure.
- Third party contracting becomes extremely difficult, as a UK general partnership cannot enter into contracts or hold property in it’s own right.
- High likelihood of losing access to banking services, legal advice, accounting advice etc.
Recommendations for further advice
- Any tax implications on the transfer of assets, as well as taxation under a Stateless DAO structure including VAT etc
- Advice on the implementation of a Stateless DAO including transfer of assets, dissolving Nexus Mutual Ltd and other items.