NEAR has launched a NEAR Community Purpose Trust to accelerate the allocation of funds to grassroots projects and utilize an innovative legal framework based on the Guernsey Special Purpose Trust, a type of trust that separates the legal title to assets from the beneficial interest in those assets.
The initiative introduces a unique legal framework for the NEAR ecosystem. It also aims to address participant liability and tax issues for DAOs helping to improve the practical implementation of the DAO structure.
The initial trust property holds 5,662,061 NEAR tokens, roughly $11 million as of press time.
According to the announcement:
“The NEAR Community Treasury is intended to serve as a decentralized treasury for the NEAR ecosystem that will allocate funds to support various grassroots initiatives. The NEAR community hopes that this framework should help to bring much-needed clarity to participants in decentralized autonomous organizations (‘DAOs’).”
The NEAR Foundation stated that it “does not have any control over” or ownership of the NEAR Community Treasury and that during this initial phase, the goal is to obtain funding proposals from three specified grassroots DAOs within the ecosystem: Developer DAO, Marketing DAO, and Creatives DAO.
Guernsey Special Purpose Trust Framework
The Guernsey Special Purpose Trust (SPT) framework is a legal and regulatory structure that allows for the creation of a specific trust in Guernsey, a British Crown dependency.
SPTs are designed for a specific purpose, offering flexibility in administration and management. The Guernsey Financial Services Commission oversees the framework and must comply with anti-money laundering and counter-terrorist financing laws.
The framework has already been used by other players in the crypto industry, such as DYDX, who implemented the framework in May 2022. In addition, Guernsey SPTs provide flexibility in the management and administration of the trust, allowing customization to meet the specific needs of a crypto project.
Also, the framework provides legal and regulatory certainty, overseen by the Guernsey Financial Services Commission, and compliance with anti-money laundering and counter-terrorist financing laws. The Guernsey SPT structure also limits the trustee’s liability and appoints independent advisers, providing extra protection for the project and its stakeholders.
NEAR Community Purpose Trust
The trust acts as a written settlement of trust between the Trustees and the Enforcer. Accordingly, the Trustees will be able to use the assets held within the NEAR Community Treasury for any activity that serves the purposes of the trust, but only with the prior approval of the NEAR community.
The Enforcer will ‘enforce’ the trust and can remove Trustees under certain conditions. The initial Enforcer is Francesco Paolo Piatti, a lawyer and blockchain regulatory associate professor at Bocconi University in Italy.
The selection process for the trustees was reportedly a joint effort of the Governance Working Group (GWG), the NEAR Foundation, and the wider NEAR community. The criteria for selecting the trustees included a “clear commitment to NEAR, leadership through building on NEAR, attendance of NEAR-based events, involvement in major NEAR projects in real life and socials, proven professionalism and management capabilities, and no U.S. citizenship or residency due to legal constraints.”
The limited power of the Trustees will be removed once the NEAR community launches this on-chain voting mechanism. The community will then be able to put forward and pass funding proposals and direct Trustees to:
- fulfill grant requests
- add Core Purposes and add/remove Subsidiary Purposes
- appoint/remove Trustee(s) and/or Enforcer
- change the NEAR Community Treasury’s governing law.
Given the lack of clarity in the U.S., deploying capital into a trust with apparent oversight while allowing crypto projects to participate is likely a core part of the appeal of a Guernsey SPT.