As regulators show greater interest in cryptocurrency, SushiSwap and other DAOs are preparing to improve their legal structures to avoid unnecessary penalties or lawsuits.
On October 26, Sushiswap, a decentralized exchange (DEX) with yield farming capabilities, decided to adopt a three-entity legal structure based in the Cayman Islands and Panama.
According to Sushiswap, they have already hired legal counsel to advise on the planning and execution of SushiDAO’s legal structure and organize the legal framework for the company and its products.
Suggested by Sushiwap
How will each foundation work?
The Cayman Islands Foundation (DAO Foundation) will govern SushiDAO IRL through a governance board that will have the “flexibility to manage the governance process on the Sushi blockchain” to facilitate off-chain activities.
In addition, the new foundation will be responsible for other essential functions such as managing the treasury, grants, the on-chain governance process and facilitating proposals and voting activities.
The “Panama Foundation” manages the existing protocol, including AMM/order book, Kashi and staking-related contracts, and provides support for service providers.
Eventually, a new company called “Panamaian Corporation” will be responsible for the protocol’s operations related to the GUI (front-end) layer.
This company will function as a wholly owned subsidiary of the Panamanian Foundation and will help service providers develop and maintain the GUI layer of the protocol.”
The SushiSwap community is responding
Although the proposal has already been approved and the team behind SushiSwap is working on its implementation, the scale of the changes has sparked much controversy among Sushiswap enthusiasts, with some users questioning whether the protocol is making the right decision when changing its domicile between the Cayman Islands sets islands and Panama because when regulatory issues arise they must be prepared to comply with the regulatory framework. As an an example, Hamletmachine said:
“In my opinion, every chef needs to embody this core ethos and let all legal discussions/outcomes guide it. It’s not acceptable for us to restrict these open source tools to every human who wants to use them, period. Otherwise, just build on Amazon AWS, apply for a Money Transmitter license and call it a day.”
For his part, Nickjrishwain pointed out that the proposal was due to its nature. While a legal structure seems like a solid recommendation, it could hamper the operation of the protocol in the long run.
Another user, nicknamed Neilbe, who appears to be part of the team that created the proposal, responded to the community’s concerns by stating that they had proposed using a foundation and corporation in Panama for the following reasons:
“(1) The nature of the protocol/GUI layer, (2) Panamanian foundations are non-commercial in nature and have no beneficial owners and are therefore ideally suited to deploy the protocol, (3) Sushi adopts account FATF VASP guidance and the structure is designed to avoid involvement in VASP activities where appropriate, (4) the company formation process results in two entities that can house the protocol and GUI layers separately, reducing the need to form additional entities, and (5 ) there is no corporate tax on these companies.”
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