Balcony DAO Co-Founder: There Are Clear Rules, People In Crypto Just Don’t Like Them

A common refrain in the blockchain industry is that regulators do not provide clear guidelines or useful regulatory frameworks for digital assets. John Belitsky, co-founder of real estate DAO Balcony DAO, disagrees.

“There are regulations in place to do that,” Belitsky said. Decrypt at Chainlink SmartCon. “Private placement offers exist, regulation D and CF offers exist. You follow the protocols already defined for you and you can release these tokens in a compliant manner.”

A DAO, or Decentralized Autonomous Organization, is an organizational structure where control is spread out rather than hierarchical. DAOs use smart contracts on a blockchain, with participants using governance tokens to vote on proposed actions.

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Founded in October 2021, Balcony DAO is a web3 real estate focused company that aims to bring real estate investment on-chain.

“We’re not a DAO in the traditional sense,” Belitsky notes. “A traditional decentralized autonomous organization cannot exist with regulated titles.”

Belitsky pointed to the anonymous nature of DAOs, where members are not required to reveal their identities to have a say in the organization. It is a non-start under current law.

“I hate to burst everyone’s bubble, but real estate is a centralized asset class,” Belitsky says. “He lives in the same place. It will never be decentralized.

According to the Securities and Exchange Commission, any offer or sale of a security must be registered with the SEC. Regulation D provides several exemptions from the registration requirements, allowing certain companies to offer and sell their securities without having to register the offer with the agency.

The CF Regulation covers crowdfunding and requires that all transactions take place online through an SEC-registered intermediary. CF also requires disclosure of information in documents filed with the SEC, investors and the intermediary facilitating the offer. A company is allowed to raise a maximum total amount of $5 million per year through crowdfunding offers.

Despite the centralized component, Belitsky says the DAO model can still be applied to properties.

“There are two places where DAOs exist in real estate,” he explains. “The first is at the asset level, and the second is the community.”

For example, says Belitsky, if a group buys a building, that building is now a special purpose vehicle (SPV) – effectively becoming a DAO. Special purpose vehicles are used to buy and lease properties in real estate and real estate investing.

Belitsky explains that these SPV DAOs could then vote on decisions such as the frequency of yield distribution or whether the DAO will reposition the asset as a hotel.

Belitsky resisted the direct comparison of what Balcony DAO does to a co-op, saying a co-op is a corporation and investors can own shares, but they don’t own the real estate itself.

“Maybe the SEC hates crypto, but they don’t hate private placement offerings,” he said. “They gave us that.”

Belitsky says the idea of ​​not having to deal with know-your-customer and anti-money laundering policies may be a crypto-anarchist dream, but that’s never going to happen in real estate .

Belitsky attributes the persistent assertion that there are no clear rules to laziness and a refusal to spend money or take the time to follow the rules.

“They don’t want to jump through hoops and they don’t want to wait,” he said.

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Balcony DAO Co-Founder: There Are Clear Rules, People In Crypto Just Don’t Like Them


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