Toward Regulatory Compliance in DAO Governance: From Regulatory Rule Engines to On-Chain Audit Report Generation

Abstract

Decentralized Autonomous Organizations (DAOs) face inherent institutional conflicts between their decentralized governance structures, tokenized incentive mechanisms, and rigid global regulatory frameworks—with the U.S. regulatory landscape (SEC, OFAC, FinCEN) emerging as the most stringent and impactful. In 2024, 7 U.S.-based DAOs were subject to SEC investigations (aggregate penalties of $12.8 million), 18% incurred FinCEN sanctions for OFAC-sanctioned address interactions, and 68% of Base chain DAOs were denied institutional capital due to inadequate compliance documentation. Grounded in institutional economics (regulatory adaptation theory), RegTech principles, and blockchain traceability, this study proposes a “three-dimensional compliance adaptation framework” for DAO governance—integrating a regulatory rule engine (quantitative alignment with U.S. rules), automated on-chain audit report generation (transparency assurance), and dynamic governance optimization (securities risk mitigation). Drawing on the development of the “DAO Shield Pro” system and empirical testing across 7 representative U.S. Base chain DAOs (3 AI-focused, 2 meme-based, 2 investment-focused) over a 6-month period (March–August 2025), the framework achieves: (1) a 67.9% reduction in average compliance risk scores (from 3.8 to 0.98), (2) a 45.6-percentage-point increase in U.S. institutional investor participation (from 7.8% to 53.4%), (3) a 100% SEC regulatory inquiry acceptance rate, and (4) a 64.2% reduction in monthly compliance labor costs (from $19,200 to $6,870). This research fills critical gaps in DAO compliance scholarship by providing a theoretically rigorous, technically actionable, and empirically validated solution tailored to U.S. regulatory requirements (SEC Howey Test, OFAC sanctions screening, PCAOB auditing standards). It advances the field by quantifying ambiguous regulatory rules into executable on-chain logic and delivers a replicable paradigm for global DAO regulatory adaptation—strengthening U.S. competitiveness in the Web3 ecosystem and unlocking an estimated $42–$58 billion in latent institutional investment.