Hong Kong legislator Johnny Ng has called for the introduction of a legal framework to regulate decentralized autonomous organizations (DAOs) as part of a broader effort to strengthen the city’s Web3 investment sector and draw global talent. Ng highlighted the importance of creating a conducive environment for Web3 development to encourage industry professionals to establish their projects in Hong Kong.
Ng’s proposal comes in the wake of a recent High Court ruling involving Mantra DAO, which mandated the organization and its infrastructure provider, RioDeFi, to disclose financial information related to the DAO’s operations. The case, which centers on allegations of misappropriation by former RioDeFi employees, has underscored the need for clearer regulatory guidelines in the fast-evolving Web3 space.
The legal dispute involves RioDeFi’s claims that it played a founding role in Mantra DAO and had hired two of the six defendants to manage the project in 2020. The court had previously ordered Mantra DAO to produce financial records and supporting documents, following allegations that the defendants had stopped reporting to RioDeFi and had made unauthorized withdrawals from a crypto account associated with the project.
The defendants argued that providing the requested financial details would be a significant challenge due to limited resources, asserting that ownership and control of the DAO rested with its token holders rather than the company itself. High Court judge Mr. Justice David Lok acknowledged the limited experience courts have in handling crypto-related cases and emphasized the necessity of transparency in DAO operations.
Ng views the court ruling as a landmark for the global Web3 community, marking the first judicial examination of a DAO. He believes that establishing a legal framework for DAOs could enhance investor confidence and solidify Hong Kong’s position as a leading hub for cryptocurrency and blockchain innovation.
In addition to his push for DAO regulation, Ng has previously urged major cryptocurrency exchanges, including Coinbase, to seek licensing in Hong Kong. He has also proposed integrating Bitcoin into the region’s official financial reserves, signaling a strong commitment to fostering a crypto-friendly environment.
Johnny Ng’s advocacy for DAO regulation reflects a strategic approach to positioning Hong Kong as a competitive force in the global Web3 landscape. By addressing the legal complexities surrounding DAOs and promoting a supportive regulatory framework, Hong Kong aims to attract international talent and investment, bolstering the city’s economic growth and innovation in the digital asset sector.
