Hong Kong Lawmaker Recommends DAO Regulation to Draw in Global Talent

Hong Kong should seize the opportunity to regulate blockchain entities following a landmark ruling ordering a HK$6b project to disclose financial records, Johnny Ng said.

Crypto Reporter Shalini Nagarajan Crypto Reporter Shalini Nagarajan About Author Shalini is a crypto reporter who provides in-depth reports on daily developments and regulatory shifts in the cryptocurrency sector. Author Profile Share Copied Last updated: August 20, 2024 01:38 EDT

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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.

“I hope the government can improve the ecology of Web3 and regulate DAOs legally so that more people in the industry will come to Hong Kong to develop their projects and bring in capital and talent,” local media reported Ng saying.

“It can be an important part of pursuing economic growth.”

Hong Kong lawmaker Johnny Ng suggested that HK government should explore creating a legal framework to regulate decentralized autonomous organizations to enhance Hong Kong's stability in the Web3 investment landscape, thereby attracting significant overseas talent and capital.… — Wu Blockchain (@WuBlockchain) August 20, 2024

Mantra DAO, RioDeFi Face Court Order to Disclose Financials

His call comes after a recent High Court ruling involving Mantra DAO. The court ordered Mantra and infrastructure host RioDeFi to disclose financial details for Mantra Chain’s operations. The ruling addresses a dispute with former RioDeFi employees accused of misappropriating funds and business from Mantra.

RioDeFi, the plaintiff, claimed its founding role and stated that it had hired two among the six defendants to manage the project in 2020.

Ng highlighted that the project’s market value was HK$6b ($780m).

RioDeFi Accuses Defendants of Misappropriation

Last year, the court instructed Mantra DAO to provide its financial spreadsheets and supporting documents to the plaintiffs upon request. The court recently revealed the reason for this ruling.

RioDeFi, incorporated in Malaysia in 2019, claimed that the defendants stopped reporting to them in 2021. They also suspected the defendants of making unexplained withdrawals from a crypto account linked to the project.

When the plaintiffs requested financial disclosure, the defendants argued that supplying payment details would be a monumental task. They explained that they didn’t have the manpower resources usually available to listed companies.

The plaintiff accused the defendants of misappropriating project assets and making unauthorized withdrawals. The defendants, however, argued that ownership and control belonged to the DAO’s token holders, not the company itself.

High Court judge Mr Justice David Lok recognized that courts in Hong Kong and globally have limited experience in handling disputes related to crypto trading.

Court Ruling Sets Web3 Precedent: Hong Kong Lawmaker

Ng viewed this court ruling as an important legal benchmark for the global Web3 community. He also noted that the case remains a shareholder dispute and does not impact the general public.

The legislator frequently highlights the need for Hong Kong to establish itself as a crypto and Web3 hub. Earlier, he encouraged major crypto exchanges like Coinbase to pursue licensing in Hong Kong. This signals his intent to create a friendly environment for digital currencies. He also proposed including Bitcoin in the region’s official financial reserves.