From traditional to decentralized governance in the crypto environment: legal framework for decentralized autonomous organizations and decentralized finance

Abstract

Decentralized and distributed systems lead to decentralized governance with transparent on-chain mechanisms. The new technological infrastructures cause fragmentation since intermediaries are no longer needed; therefore, the decentralized organizational models will have a remarkable impact on company law and financial markets regulation. The existing corporate forms do not fully satisfy the needs of decentralized autonomous organizations, and at least some adaptations become necessary to make governance mechanisms more flexible. In the field of financial law, alternative regulatory designs must be developed that more intensively address the offering of services as such rather than – as traditionally – the service providers. This contribution analyzes the normative needs for an appropriate legal framework in an environment of decentralization and considers potentially relevant new legal provisions reflecting the forthcoming business needs and participants’ protection requirements.