Israel is famously known as the “Startup Nation,” a beacon of innovation in cybersecurity, fintech and deep tech. But in the race to define the future of digital governance, we are at risk of becoming the “Wait-and-See Nation.” That must change.
The next evolution in global technology is not simply faster processors or smarter AI—it is the transformation of how organizations, markets, and even democracies operate. This transformation is being driven by Decentralized Autonomous Organizations (DAOs), which use blockchain and smart contracts to enable collective decision-making, resource management, and innovation—without traditional hierarchies or borders.
DAO emerging as a potential building block for the future of the global economy, particularly in the Web3 space. By mid-2025, over 50,000 DAOs will collectively manage more than $17.5 billion in assets. From DeFi to philanthropy, from digital art to real estate, DAOs are reshaping the rules. And yet, Israel—despite its unmatched tech ecosystem—remains on the regulatory sidelines.
The inter-ministerial team’s recent conclusion that “no dedicated legislation is justified at this stage” due to the “limited scope of the local DAO market” misses the forest for the trees. This is not just a misreading of the technology—it’s a fundamental miscalculation of strategic opportunity.
DAOs are not merely a new corporate form; they are the foundation of a new economic logic—one that values transparency, community ownership, and algorithmic trust. Countries like the United States (Wyoming and Utah), the Marshall Islands, and Switzerland are already moving ahead with DAO-friendly legislation, attracting talent, capital, and leadership in the Web3 economy.
The paradox is clear: Without regulatory clarity, Israel will never develop a meaningful local DAO market. But waiting for that market to appear without supportive regulation ensures it never will. Innovation cannot grow in a vacuum of legal uncertainty. Right now, DAOs in Israel face the risk of being classified as general partnerships, exposing all members to unlimited personal liability. That is not a breeding ground for innovation—it’s a legal deterrent.
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Instead of reacting cautiously, we must act boldly. We propose the immediate development of a “Digital Entity” legal framework that offers limited liability and legal recognition for DAOs. This would be similar to the DAO-specific LLCs introduced in Wyoming, giving innovators in Israel and worldwide the legal certainty they need to build, experiment, and attract global collaborators.
Second, we call for “regulation by code”—a model where compliance, taxation, and reporting are embedded directly into smart contracts. This approach turns blockchain’s transparency and immutability into regulatory strengths rather than weaknesses.
Third, Israel should establish DAO regulatory sandboxes—safe environments for experimentation where startups, regulators, and researchers can co-develop new governance models. This is how Israel can again be a global testbed, not just for cybersecurity and AI, but for the institutional DNA of the future.
Fourth, we must lead globally. Israel should be an active voice in international standard-setting bodies—from the OECD to FATF—helping shape harmonized DAO frameworks that prevent jurisdictional arbitrage and uphold security and accountability.
Finally, we must invest in education and ecosystem development. Blockchain developers, smart contract auditors, legal scholars, and economists are the new digital civil engineers. Let’s build the human capital to lead—not follow—this transition.
We know from experience that Israel thrives when it takes calculated risks and sets bold goals. It was true with drip irrigation, the Iron Dome, and unicorn tech companies. It can be true again with digital governance. The time to watch has passed. The time to lead is now.
Milly Perry, PhD, is Blockchain Center Chair at the Israeli Chamber of DAO4DAOs and author of the dynamic book “Blockchain – Turning ego-system to ecosystem”.
Ilan Alon is Prof. of International Business & Economics at Ariel University and Editor‑in‑Chief of the International Journal of Emerging Markets and a specialist in crypto and AI governance.
Milly Perry and Ilan Alon have spent years mapping this matrix—highlighting how tokenized networks and DAOs create new legal, financial and organizational architectures.