Blockchain 2023 Comparisons

Blockchain and the market for crypto-assets are in continuous development in Denmark. An increasing number of companies are placing greater focus on the research and development of blockchain and distributed ledger technology (DLT) projects as a part of their business model.

In addition, several crypto-asset service providers such as crypto-asset exchanges and platforms have entered the Danish market, which was previously dominated by foreign market participants.

Furthermore, several alternative investment funds with an investment strategy focused on blockchain and/or crypto-assets have been established in recent years.

Regulatory Development of the Blockchain Market

From a regulatory point of view, the legal challenges and the supervisory focus on blockchain and crypto-assets have increased due to the development of blockchain and crypto-assets in general.

As the Danish legislature has not announced the introduction of any specific rules on blockchain or crypto-assets prior to the implementation of the EU regulation on Markets in Crypto-Assets (MiCA), market participants are focusing on the draft regulation and its impact on their business activities.

DLT and blockchain are used in numerous sectors, including the financial and healthcare sector, and for supply chain management, etc.

For example, the blockchain solution Concordium and its native token CCD have been launched, focusing on compliance, energy efficiency and low and stable transaction costs.

Furthermore, the payment solution ZTLment is a promising proof of concept that enables partial payments based on smart contracts.

In addition, Januar has been launched as a financial services partner for crypto-businesses and assists with bank accounts, which has previously been an issue for crypto-companies in Denmark. Thus, Januar is offering infrastructure to support and provide IBAN business accounts for crypto-businesses so they can conduct their payments and operational transactions.

An ecosystem for the use of decentralised finance (DeFi) has yet to be developed in the Danish market. Generally, DeFi is already being used by Danish citizens, but mainly on foreign DeFi platforms, as not many Danish DeFi projects have yet been developed.

However, the Danish-based “MakerDAO” project has attracted great attention to DeFi among blockchain participants on the Danish market. MakerDAO is a decentralised lending platform on Ethereum that supports Dai, a stablecoin whose value is pegged to the US dollar. MakerDAO allows participants to lock in Ethereum as collateral and receive Dai as debt against that collateral.

The prevalence and use-case of non-fungible tokens (NFTs) is attracting increased attention in the Danish market, and a number of companies are currently experimenting with NFTs and the metaverse.

One example is the NFT marketplace “Spaceseven”, which is based on the Concordium blockchain and allows the minting and trading of NFTs. The “Beatoken” Danish NFT marketplace is also under development (currently in its beta version), permitting the creation and sale of music NFTs.

Denmark has not adopted a specific regulatory regime applicable to blockchain or crypto-assets. Accordingly, activities relating to blockchain and crypto-assets are subject to the existing regulation, which in many ways is not suitable for these new technologies. However, certain crypto-asset service providers are regulated under the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism.

As crypto-assets are not generally classified as financial instruments or electronic money, the regulation of related activities is limited under Danish law. Accordingly, the Danish Financial Supervisory Authority (FSA) has issued several press releases and warnings related to cryptocurrencies and associated activities.

A crypto-asset service provider engaged in activities with crypto-assets that are categorised as financial instruments (eg, security tokens) must consider the Danish financial regulation. Please see 3.2 Categorisation regarding the determination of the categorisation of crypto-assets.

General Regulation

Crypto-asset service providers must comply with general Danish law when providing services in Denmark, including the marketing regime, contractual law, the General Data Protection Regulation (GDPR), consumer protection regimes, etc.

Denmark is not expected to introduce a specific regulatory regime prior to the adoption of the EU MiCA regulation, which is set to apply to persons engaged in the issuance or provision of services related to crypto-assets not within the scope of existing EU regulation.

Denmark transposed the Fifth Anti-Money Laundering Directive (5AMLD) in the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism in 2020 (the Act). As the recommendations of the Financial Action Task Force (FATF) on “virtual assets” included more regulated entities than were contained in the 5AMLD, Denmark implemented the FATF recommendations in the Act in 2021. Accordingly, the Act regulates the following entities:

• providers of exchange services between virtual currency and fiat currency;
• providers of exchange services between virtual currency and one or more virtual currencies;
• providers of transfer services of virtual currencies;
• custodian wallet providers; and
• issuers of virtual currencies.

For further information on the Danish anti-money laundering rules on crypto-assets, please refer to 4.3 KYC/AML/Sanctions.

The Danish FSA is the main supervisory authority of blockchain, crypto-assets and related services, and its primary task is to supervise financial undertakings, including fintech companies. The Danish FSA has a designated fintech division, which also supervises crypto-asset service providers. In addition to its supervisory activities, the Danish FSA assists in drawing up financial legislation and issuing executive orders within the financial area.

However, as Denmark has not yet introduced any specific regulation of crypto-assets or crypto-asset service providers (except for anti-money laundering regulation), several regulators may be involved in services related to crypto-assets.

Denmark has no direct self-regulatory organisations or trade groups that perform regulatory or quasi-regulatory roles with respect to businesses or individuals using blockchain in Denmark. However, as a member of the International Organisation for Standardisation (ISO), Danish Standard recently published a standard on blockchain governance, which is expected to contribute to the development of blockchain business in the Danish market.

Denmark has not yet seen any important judicial decisions providing guidance on the interpretation of the legal regime applicable to the use of blockchain. However, the taxation of cryptocurrencies has been dealt with in numerous judicial decisions; please see 2.8 Tax Regime for further detail.

In the absence of specific regulation of blockchain and crypto-assets, the Danish regulators have issued several warnings on the use of cryptocurrencies. Accordingly, related activities are not covered by the consumer protection rules, etc.

However, the warnings also state that activities with blockchain and crypto-assets are permitted under Danish law.

The Danish FSA has established a regulatory sandbox focused on fintech projects, including blockchain-based projects, called the FinTech Lab. The regulatory sandbox allows selected companies to test new technologies or business models that can be difficult to place within the existing financial regulation. It assists the companies and the Danish FSA in understanding the use of new technologies and business models within the financial area.

ZTLment and the FinTech Lab

Recently, Danish-based company ZTLment has been part of the FinTech Lab, where the Danish FSA examined the use of its blockchain-based payment service and the application of the Danish rules applicable to these services.

Following ZTLment's test in the FinTech Lab, the Danish FSA published a memorandum in which it acknowledged blockchain as an effective payment infrastructure. The FSA further noted that the provision of payment services that involve the use of blockchain may be deemed a permissioned activity requiring a licence from the Danish FSA.

Denmark has not introduced specific tax rules nor amended existing rules in relation to cryptocurrencies.

Pursuant to Danish tax law, profits derived on assets not specifically regulated by tax law (such as cryptocurrencies) are generally tax exempt. However, as an exception, if profits on such assets are derived from active trade or for speculative purposes, the profits are considered taxable income. Danish case law and administrative practice shows that it is difficult for taxpayers to lift the burden of proof that an acquisition of cryptocurrencies is not considered for speculative purposes. Hence, profits are commonly considered taxable income.

Pursuant to a tax ruling, the Danish National Tax Board has confirmed that NFTs are taxed similarly to cryptocurrencies, as described above.

Commission on Taxation Recommendations

The Danish Ministry of Taxation has appointed a commission to prepare recommendations on the taxation of crypto-assets to ensure balanced taxation, considering the characteristics of trading crypto-assets. The recommendations are expected no later than mid-2023.

The Danish FSA has announced an increased supervisory focus on crypto-assets, and has accordingly established a working group consisting of market participants, focused on blockchain and DeFi. The working group has been set up to ensure effective supervision of the market on crypto-assets, so will provide input on the preparation of guidelines and risk assessments and contribute to the Danish FSA's general level of knowledge within the area of blockchain and DeFi.

Under Danish law, there are no specific rules dealing with the transfer of ownership via a blockchain network. Accordingly, ownership disputes must be determined pursuant to the general Danish rules on ownership.

Under Danish law, the rules governing transfer of ownership depend on the type of asset – eg, whether they are movables (løsøre), claims (fordringer) or real estate (fast ejendom). It is uncertain how crypto-assets will be categorised but it could be suggested that they most resemble movables, as this category also comprises intangible items.

Based on this assumption, the ownership of crypto-assets will pass when the parties agree on the crypto-assets to be transferred and their price, unless the parties explicitly agree that ownership is to pass at a later time.

If the crypto-assets are fungible, the transfer will be considered final only when the specific crypto-assets to be transferred can be identified – eg, by registration on the blockchain.

Denmark has no regulatory guidance or generally accepted categorisation of crypto-assets. Accordingly, there are no sub-categories of crypto-assets under Danish law to distinguish the type of crypto-asset.

As no Danish legislation on crypto-assets has been introduced, the categorisation is expected to reflect the categorisation used in the EU MiCA regulation.

Due to the absence of specific regulation on crypto-assets under Danish law, it is critical to assess whether a crypto-asset qualifies as a financial instrument or electronic money, as Danish financial regulation may become applicable in such case.

Categorisation of Crypto-assets as Financial Instruments

Danish law includes no requirement regarding the legal identity or structure for an asset to be defined as a financial instrument. Accordingly, crypto-assets shall be assessed based on their characteristics and whether they can be considered a financial instrument pursuant to applicable Danish law.

The assessment of a crypto-asset as a financial instrument may be based on whether the crypto-asset:

• is standardised;
• is transferable;
• is negotiable; and
• has a financial aim.

The determination will be made on a case-by-case basis.

Categorisation of Crypto-assets as Electronic Money

Under the Danish Payments Act, electronic money is defined as “an electronically or magnetically stored monetary value representing a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions and is accepted by other parties than the issuer of the electronic money.”

Pursuant to the definition, a crypto-asset must represent a value that is stored electronically or magnetically and represent a claim against the issuer. As crypto-assets will not generally represent a claim against the issuer, they will not be deemed electronic money under the Danish Payments Act.

The determination will be made on a case-by-case basis.

If a crypto-asset is structured in such a way as to be deemed electronic money, the issuer must consider the Danish Payments Act and whether the issuer must apply for a licence from the Danish FSA.

Crypto-assets whose value is pegged to a second asset (ie, stablecoins) are not directly regulated under Danish law. Accordingly, no distinction is made between stablecoins backed by deposits of fiat currency and algorithmic-backed stablecoins. Due to the characteristics of stablecoins, it is crucial to consider whether the stablecoin is considered a financial instrument or electronic money under Danish law; please see 3.2 Categorisation.

The use of cryptocurrencies for payments is allowed under Danish law. However, as cryptocurrencies are not legal tender in Denmark, a party can refuse to accept payment in cryptocurrency. In addition, crypto-asset service providers facilitating the exchange of cryptocurrencies, etc, may be regulated by the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism.

Denmark has not implemented specific regulation on NFTs or related activities. Accordingly, the creation, marketing and/or sale of NFTs are non-regulated activities to the extent they are not subject to the general rules on consumer protection, competition, marketing, the GDPR, protection of intellectual property rights, etc.

The Danish market on crypto-assets is in continuous development. Previously, the market consisted primarily of foreign exchanges, but several operators have now entered and/or expanded in the Danish market.

The licensed Norwegian Firi cryptocurrency exchange launched in Denmark in 2022. Similarly, the Danish platform BitInvestor facilitates OTC purchases of cryptocurrencies. Furthermore, the Danish bank Lunar has launched a cryptocurrency platform, called Lunar Block.

Regarding NFTs, Danish-based marketplaces Spaceseven and Beatoken can be used for the purchase, sale and/or creation of NFTs.

However, as far as is known, no decentralised exchanges are operating from Denmark.

There are several cryptocurrency exchanges and platforms in Denmark that allow users to exchange fiat currency for cryptocurrencies (and vice versa), including Firi, Lunar Block and Copenhagen Bitcoin.

Danish Regulation on Money Remittance and Crypto-exchanges

Under the Danish Payments Act, money remittance is a regulated activity requiring a licence from the Danish FSA.

Money remittance is defined as “a payment service where funds are received from a payer without the establishment of a payment account in the name of the payer or payee, for the sole purpose of transferring a corresponding amount to the payee or to another payment service provider on behalf of the payee, or where such funds are received on behalf of the payee and made available for the payee.”

As crypto-assets in general do not constitute “funds” within the meaning of the Danish Payments Act, the activity of transferring crypto-assets does not constitute a money remittance service.

Accordingly, crypto-to-crypto exchanges' facilitation of the transfer of crypto-assets for other crypto-assets does not constitute a money remittance service under Danish law. Should the transferred crypto-assets constitute “funds” (eg, electronic money), the activity of transferring crypto-assets on an exchange may represent a regulated activity.

Fiat-to-crypto exchanges facilitating the transfer of fiat currencies on behalf of the users of the platform may constitute a money remittance service.

Denmark has transposed 5AMLD and the FATF recommendations into the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism, which regulates the following service providers:

• providers of exchange services between virtual currency and fiat currency;
• providers of exchange services between virtual currency and one or more virtual currencies;
• providers of transfer services of virtual currencies;
• custodian wallet providers; and
• issuers of virtual currencies.

Definition of “Virtual Currencies”

Pursuant to the Act, virtual currency is defined as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.”

With the development of crypto-assets, the scope of the definition of “virtual currencies” has become unclear, as the definition only covers digital representations of value that are accepted as a means of exchange. Accordingly, it is uncertain whether the definition covers security and utility tokens or only cryptocurrencies.

Requirements on Virtual Currency Service Providers

The Act requires certain crypto-asset service providers to be registered with the Danish FSA. The management and beneficial owners of the crypto-asset service provider must be considered “proper” prior to said registration.

Furthermore, a crypto-asset service provider must comply with the know-your-customer (KYC) rules laid down in the Act, which include obligations on customer screening, identification and verification, and the reporting of unusual transactions. In addition, businesses and individuals covered by the Act must perform customer due diligence when carrying out a single transaction of:

• EUR500 or more that involves currency exchange, including exchange between a virtual and a fiat currency, whether by one or a series of transactions that are or appear to be linked; or
• EUR1,000 or more that involves currency exchange between one or more types of virtual currency, a transfer of virtual currency or an issue of virtual currency, whether by one or a series of transactions that are or appear to be linked.

Denmark has no regulatory regime dealing with crypto-assets in general. As crypto-assets are not generally classified as financial instruments or electronic money, the regulation of related activities is limited under Danish law. Accordingly, no significant enforcement actions have been seen in Denmark.

The Danish FSA is the main regulator of crypto-assets and is also the relevant regulator under the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism, which covers certain crypto-asset service providers.

Crypto-asset service providers must comply with other applicable legislation when providing services in Denmark, including the Danish marketing regime, contractual law, the GDPR, consumer protection rules, etc. Accordingly, several regulators may be implicated in services related to crypto-assets.

No specific regulatory limits have been imposed on the re-hypothecation of crypto-assets under Danish law. However, if a crypto-asset is categorised as a financial instrument, the activity may be regulated by the rules on the transparency of securities financing transactions and of reuse (SFTR reporting).

Accordingly, crypto-asset service providers offering re-hypothecation of security tokens or other financial instruments must obtain the consent of clients or counterparties before re-hypothecation, and ensure they make an informed decision and are aware of the associated risks.

Custodian wallet providers are a regulated entity under the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism and must therefore comply with the provisions of this Act.

The Act defines a custodian wallet provider as “an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies.”

Accordingly, the Act regulates both “hot” and “cold” wallets.

Under Danish law, there is no specific regulation governing fundraising through the creation and sale of coins intended to be used as part of a decentralised network – ie, an initial coin offering (ICO).

If, however, the offered coin is considered a “financial instrument”, it may be subject to the financial regulation and the offering will be intensely regulated, particularly by the Danish prospectus rules.

Danish regulators have not yet provided any principles or guidance as to the assessment of whether or not a coin may be deemed a financial instrument. The assessment of a financial instrument should, however, be based on the characteristics of the crypto-asset, including whether it:

• is standardised;
• is transferable;
• is negotiable; and
• serves a financial purpose.

The Danish FSA's Statement on ICOs

In 2017, the Danish FSA published a statement on ICOs in general and whether they are regulated under Danish law. Pursuant to the statement, cryptocurrencies that solely function as a means of payment are unregulated. However, the Danish FSA notes that the Danish financial regulation may apply if the offered coin includes characteristics of a financial instrument. The determination of the offered coin will be made on a case-by-case basis.

In 2018, the Danish FSA published a statement regarding a specific ICO and whether the activity was within the scope of the Danish financial regulation. Pursuant to the statement, the ICO was neither subject to the prospectus rules nor covered by the Danish Payments Act, as the offered cryptocurrency was deemed neither a financial instrument nor electronic money.

Under Danish law, there is no specific regulation governing fundraising through the sale of coins by using a crypto-asset exchange as an intermediary – ie, an initial exchange offering (IEO).

If, however, the offered coin is considered a “financial instrument”, it may be subject to the financial regulation and the offering will be intensely regulated by Danish financial regulation. Accordingly, the exchange may be subject to the regulation on European crowdfunding service providers for businesses, in which case it may need to apply to the Danish FSA for a licence if it has its principal place of business in Denmark.

Airdrops or similar distribution mechanisms are considered a non-regulated activity under Danish law. In Denmark, the use of airdrops is seen as the most common distribution of tokens not involving the purchase of the token. However, the tokens received by the launch mechanism will generally be taxable under Danish law.

Under Danish law, no special regulation has been imposed on investment funds or collective investment schemes that invest in crypto-assets.

UCITS' Investments in Crypto-assets

Under the Danish rules on undertakings for collective investments in transferable securities (UCITS), a Danish UCITS may only invest in financial instruments. Accordingly, as crypto-assets are generally not considered a financial instrument, Danish law prohibits UCITS from investing in crypto-assets.

Should a crypto-asset be deemed a financial instrument, the UCITS may invest in it, although it must comply with the Danish rules on UCITS, including the requirement for sufficient risk spreading, the appointment of a depositary, valuation, rating of risks, etc.

Alternative Investment Funds' Investments in Crypto-assets

Pursuant to Danish financial regulation, there are no specific rules preventing alternative investment funds from investing in crypto-assets. Denmark has recently seen an increase in alternative investment funds focused on blockchain and crypto-assets in general.

Please see 7.3 Custody regarding the requirements on UCITS' and/or alternative investment funds' custody of crypto-assets.

Under Danish law, there is no specific regulation governing broker-dealers or other financial intermediaries that deal in crypto-assets. However, certain financial intermediaries (eg, fiat-to-crypto and crypto-to-crypto exchanges) are covered by the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism.

However, a financial intermediary that performs activities with crypto-assets that are deemed financial instruments may be regulated by the Danish Act on Investment Firms and Investment Services and Activities. Accordingly, the activities performed by the intermediary may require a licence from the Danish FSA, and the intermediary may have to meet certain organisational and capital requirements and fit and proper requirements in relation to its management.

Under Danish law, there are no rules or binding judicial decisions addressing the legal enforceability of smart contracts.

Danish law generally includes no requirements as to the form of a contract. Accordingly, a self-executing contract – ie, a “smart contract” – may be permitted, provided that it is based on an offer and the acceptance of such.

Like all other contracts, smart contracts may be deemed valid and enforceable under Danish law. However, if the smart contract is written in computer code, it may have to be translated into regular language in a reliable manner in order to be enforceable.

The question of whether developers of blockchain-based networks, or of the code that runs on those networks, can be held responsible for losses that arise through the use of this software has not been addressed in detail in Denmark, by neither the legislator nor legal literature.

When determining the liability of developers of blockchain-based networks, or of the code that runs on those networks, the general Danish rules on liability will apply. However, developers of blockchain-based networks will generally not be held liable for losses that arise through the use of the software, due to the theory that the developers should be considered “fiduciaries”.

Under Danish law, DeFi platforms that match borrowers and lenders of crypto-assets are permitted to operate in Denmark. However, the credit agreements made on the platform may be regulated by the Danish Act on Credit Agreements.

The Act applies to credit agreements where the lendee is a consumer and the lendor acts in the performance of their business. As most loan agreements on DeFi are entered into between consumers acting as lendor and lendee, the Act will generally not apply. If, however, the DeFi platform is deemed a credit facilitator acting in the performance of their business, the Act will apply.

Credit agreements regulated by the Act are subject to provisions ensuring consumer protection, including disclosure obligations, right of cancellation, etc.

The Danish Act on Consumer Loans

Pursuant to the Danish Act on Consumer Loans, credit agreements where the lendee is a consumer are subject to certain credit limits. Accordingly, the annual percentage yield may not surpass a 35% threshold, and the costs of the loan may not exceed 100% of the total credit amount.

Under Danish law, how an effective security interest may be taken will depend on the type of assets – eg, whether they are movables (løsøre), claims (fordringer) or real estate (fast ejendom).

It is uncertain how crypto-assets will be categorised, but it could be suggested that they most resemble movables, as this category also comprises intangible items.

Accordingly, a security interest in a crypto-asset may be taken by way of a pledge, whereby the pledgee takes possession of the crypto-asset – ie, the wallet containing the crypto-asset in question. In addition, security interest in a crypto-asset may be made by registration of a mortgage.

Under Danish law, “professional investors” are not required to transfer their crypto-assets to a custodian (also known as a depositary). However, if the investor in crypto-assets is a licensed alternative investment fund or a UCITS, a depositary must be appointed pursuant to the Danish Act on Alternative Investment Funds and the Danish Act on UCITS.

Under these Acts, only certain entities established within the European Economic Area may act as a depositary for an alternative investment fund.

The duties of the depositary depend on the type of asset invested in – ie, whether the asset is a financial instrument or any other asset. In the case of investment in financial instruments, the depositary must perform certain duties, including checking cash flows, holding the assets of the alternative investment fund/UCITS and carrying out controls relating to:

• the issue and redemption of shares;
• the calculation of the net asset value; and
• the use of the income of the UCITS/alternative investment fund.

To the extent that personal data is processed in blockchain-based products (including pseudonymised data), applicable data protection legislation will apply to such processing, including the GDPR and the Danish Data Protection Act. The data controller must provide information to the data subjects about the processing of their personal data, and ensure that the data subjects can exercise their data subjects' rights, etc.

Accordingly, companies using blockchain-based products or services must ensure that applicable data protection legislation is complied with.

The Right to Be Forgotten

In connection with the use of blockchain-based products or services, the developer must consider the “right to be forgotten” (RTBF), pursuant to Article 17 of the GDPR. The RTBF is a data subject’s right to request that their personal data is erased under certain circumstances, including where the data subject has withdrawn their consent and where there is no other legal ground for the processing.

Due to the immutable nature of blockchain, the RTBF may be problematic to comply with, and must be taken into account when developing the blockchain if personal data is expected to be stored thereon.

Accordingly, if personal data is stored on the blockchain, the blockchain solution must enable the erasure of such personal data – eg, by the anonymisation of data to ensure that the data subject cannot be identified directly or indirectly.

Please refer to 8.1 Data Privacy.

The activity of “mining” cryptocurrencies based on a “proof of work” consensus protocol in exchange for tokens native to the blockchain is allowed under Danish law.

However, any profits derived from mining are taxable under Danish law.

The activity of “staking” tokens to secure a blockchain-based network based on a “proof of stake” consensus protocol is allowed under Danish law, but no specific regulation has been introduced. However, any profits derived from staking are taxable under Danish law.

Businesses Enabling Staking

Staking as a service is generally offered by foreign entities. However, Danish company “Northstake” also offers staking services to private and professional investors.

DAOs have not yet been developed in Denmark, so not many DAOs exist on the Danish market. However, Danish proof of concepts based on, or simply including, the use of DAOs have been introduced. Danish-based MakerDAO, upon which the stablecoin “dai” is based, is the frontrunner of DAOs in Denmark.

Denmark has not yet introduced any specific regulation of DAOs. Accordingly, the DAO must comply with general Danish rules and consider whether the issued governance token may be deemed a financial instrument.

As DAO activity in Denmark is very limited, it is not possible to describe any general trends regarding the governance, allocation of tokens, voting thresholds, etc.

As DAO activity in Denmark is very limited, it is not possible to describe what legal entity structures are being utilised most frequently. However, under Danish law a DAO would most likely be established or considered as a partnership with joint and several liability. The use of a legal entity structure enables the DAO to gain rights and incur obligations for its members/participants.