Hong Kong legislator Johnny Ng proposed that the government establish decentralized autonomous organization (DAO) regulations to strengthen the city’s Web3 investment sector and attract international talent. Ng hopes that by improving the ecology of Web3 and legally regulating DAOs, more industry professionals will come to Hong Kong to develop projects and bring in capital and talent, ultimately contributing to economic growth. This move is seen as a way to enhance Hong Kong’s stability in the Web3 investment landscape.
The call for regulating DAOs comes in light of a recent High Court ruling involving Mantra DAO and infrastructure host RioDeFi. The court ordered both parties to disclose financial details related to Mantra Chain’s operations, following a dispute with former RioDeFi employees accused of misappropriating funds and business from Mantra. RioDeFi claimed its founding role in the project and stated that it had hired two of the defendants to manage the project in 2020. The project’s market value was reported to be HK$6 billion ($780 million).
Last year, the court instructed Mantra DAO to provide financial spreadsheets and supporting documents to the plaintiffs upon request. RioDeFi claimed that the defendants stopped reporting to them in 2021 and suspected unauthorized withdrawals from a crypto account linked to the project. The defendants argued that they did not have the resources available to listed companies to provide payment details, citing ownership and control belonging to the DAO’s token holders. The court found that both local and global courts have limited experience in handling disputes related to crypto trading.
Ng views this court ruling as a significant legal benchmark for the global Web3 community. He emphasizes the importance of establishing Hong Kong as a hub for crypto and Web3 activities, advocating for major crypto exchanges like Coinbase to pursue licensing in the region. Additionally, he proposed including Bitcoin in Hong Kong’s official financial reserves, indicating a strong intention to create a favorable environment for digital currencies. Ng’s efforts aim to create a more welcoming environment for digital assets in Hong Kong.
The court ruling pertaining to Mantra DAO and RioDeFi is seen as a critical development in the context of Web3, setting a precedent for legal proceedings involving crypto projects. Ng perceives this case as a shareholder dispute that does not directly impact the general public. By emphasizing the importance of regulations and legal frameworks for DAOs and other crypto entities, Ng aims to position Hong Kong as a leader in the evolving digital asset landscape, attracting international talent and investment. Overall, the push for regulatory clarity in the crypto sector reflects a broader effort to foster innovation and growth in the industry.
