Charity Law and the Limits of DAO Integration

The evolution of distributed ledger technology has generated considerable interest in the future of organisational governance and design, particularly through the emergence of Decentralised Autonomous Organisations (DAOs). These entities seek to move governance away from traditional management hierarchies and towards distributed networks coordinated through blockchain infrastructure. In practical terms, this means embedding decision-making protocols into smart contracts and dispersing voting authority across a global body of token holders. In theory, that model should be attractive to the philanthropic sector. DAOs appear to offer speed, transparency and the capacity to coordinate public interest initiatives across borders. Yet their adoption by charities remains almost negligible. In light of this, my latest article examines the legal position in England and Wales and argues that the friction between DAOs and charity law is structural rather than transitional. The difficulty is not simply that regulation has failed to keep pace with technological change. It is that DAO governance and charity law proceed from different assumptions about how institutional trust is created and enforced.

This difference creates a persistent legal problem. An organisation that disperses control across an anonymous and fluctuating network cannot easily interface with a legal system that demands a personal locus of responsibility. Technological change, whilst important, often re-encounters old legal problems in a new form. Here, that issue is primarily one of accountability. DAO governance relies on algorithmic trust, where constraint and enforcement are achieved deterministically through immutable code and cryptographic verification. Charity law, conversely, is explicitly anchored in fiduciary trust, functioning as an institutional framework designed to secure public confidence and protect assets through traceable, individual accountability. Under the Charities Act 2011, the Trustee Act 2000, and the Companies Act 2006, the legal regime requires identifiable natural or legal persons who owe strict, non-delegable duties of loyalty, care, and independent judgment. This matters because those duties are the mechanism through which the law creates accountability when an individual within an organisation acts in bad faith, misapplies charitable assets, or allows charitable purposes to be displaced.

As a result, a fiduciary bottleneck emerges where operational control seeks legal recognition. A DAO may disperse internal authority among token holders, but it cannot autonomously project legal effect into the external legal order. DAOs do not possess inherent legal personality under English law. They cannot hold property, execute contracts or engage with HM Revenue and Customs to claim charitable tax reliefs in their own right. Any decentralised preference, including one expressed through an on-chain vote, must therefore pass through legally recognised human intermediaries before it can take effect. The point is not that technology cannot automate administrative functions or improve participation. It is that legal recognition and operational control remain distinct. Algorithmic execution may determine how a network behaves internally, but it does not remove the law’s demand for an answerable person where rights, duties and public resources are engaged.

To bridge this gap, projects frequently adopt corporate or trust-based legal wrappers, such as companies limited by guarantee or charitable incorporated organisations. These mechanisms, however, introduce a paradox of re-centralisation. The moment a wrapper is deployed to grant a DAO legal standing, it re-anchors responsibility in identifiable directors or trustees. These fiduciaries cannot simply abdicate their duties or bind themselves to follow automated smart-contract outcomes blindly. Indeed, if an on-chain vote dictates an action that violates their fiduciary standard of care or conflicts with the charity’s established public benefit purpose, the trustees are legally required to intervene and override the code. The better view is that the legal wrapper does not merge the two systems; it subordinates the algorithmic layer to traditional fiduciary oversight.

This demand for individual traceability is reinforced by the supervisory architecture of the state. The Law Commission’s scoping paper on DAOs declined to recommend a bespoke legal entity, leaving distributed networks dependent on existing legal forms. Courts have also shown a willingness to search for a locus of human responsibility within decentralised infrastructure. Significantly, Tulip Trading Ltd v van der Laan [2023] indicated that software developers and other actors exercising de facto control over blockchain protocols may, in principle, owe fiduciary duties to users. The same instinct is visible in charity regulation. The Charity Commission’s enforcement powers depend on the ability to identify, investigate, sanction and remove officeholders. Without an identifiable target, the mechanisms that preserve public confidence in charitable administration become unstable.

What this shows is that DAOs expose a deeper tension between legal coverage and operational control. A decentralised network may exercise meaningful operational influence, but both charity and company law require that influence to be channelled through persons who can be held to account. For DAOs seeking to operate within highly regulated spaces, true decentralisation is difficult to sustain. Fiduciary regulatory regimes demand that public resources remain tethered to identifiable human agents. The friction between decentralised governance and charity law is therefore not a temporary defect in legal modernisation. It is a structural consequence of a legal order that permits technological intermediation but still insists on human accountability where charitable assets and public trust are at stake.

The author’s paper is available here.

Matthew Robert Shillito is a Senior Lecturer in Business and Commercial Law at Lancaster University.