5. Legal and Compliance

DAOs are not recognized as legal entities in the majority of jurisdictions. As a result, they lack the capacity to be parties to legal contracts such as investments or transactions, and do not have access to courts. Consequently, enforcing legal actions or recuperating losses in real-world scenarios becomes exceedingly challenging. Without legal grounding in a jurisdiction pertaining to investments, lawmakers may categorize a DAO as a collective investment scheme or similar entity. This classification often entails stringent regulatory requirements and penalties, or in extreme cases, complete prohibition.

DAOs engaging with RWA often rely on centralized intermediaries, such as banks, to serve as asset managers and custodians. However, this dependence on centralized parties poses challenges in providing proof of funds and navigating real-world operational complexities. In addition to complying with intricate regulations concerning specific RWAs (e.g., property in many jurisdictions), DAOs shall address issues such as restricted asset ownership, verification of fund sources, anti-money laundering (AML) and counter-terrorism financing (CTF) measures, as well as tax obligations.

The Auroca DAO shall address these challenges with a focus on legal clarity and financial efficiency. For the purpose of establishing a tangible real-world association with legal standing in a reliable and stable jurisdiction, the Auroca DAO shall initiate the registration of a "Verein" in Zug, Switzerland.

In Switzerland, an association holds legal status and operates with formal decentralized governance structures such as articles of association, a president, general assembly, audit processes, and membership protocols. Such a model has proven to be highly effective for organizing activities in a decentralized manner.

While registration in the commercial registry is not mandatory, to adhere to the Auroca DAO key values such as transparency and trust it is strongly recommended. Furthermore, the proposed real-world setup and governance framework can be seamlessly digitized and managed using smart-contracts on Distributed Ledger Technology (DLT).