Decentralized Autonomous Organizations (DAOs): A Conceptual Model for Community-Owned Banking and Financial Governance

Decentralized Autonomous Organizations (DAOs) represent a transformative innovation in financial governance, enabling community-owned and transparently operated structures through blockchain technology. This paper presents a conceptual model for integrating DAOs into the banking and financial services sector to promote equitable, trustless, and decentralized financial systems. Traditional banking frameworks often rely on centralized authorities, opaque governance, and profit-driven agendas that marginalize underserved populations. By contrast, DAOs offer a paradigm where smart contracts execute predefined rules without intermediaries, allowing stakeholders to participate directly in decision-making processes. The proposed model outlines a framework for community-owned banking, emphasizing the use of token-based governance, peer-to-peer lending mechanisms, automated interest rate adjustments, and decentralized reserve management. This system fosters financial inclusion by allowing unbanked and underbanked populations to access financial services through open and transparent digital platforms. Moreover, DAO-based financial governance ensures real-time auditability, accountability, and resistance to single points of failure—addressing critical vulnerabilities in conventional financial institutions. Through the conceptualization of a DAO-led Community Bank (DAO-CB), the paper demonstrates how decentralized finance (DeFi) primitives such as liquidity pools, stablecoins, and collateralized lending can be integrated with democratic governance models to create robust, community-led economic ecosystems. Legal, technical, and regulatory considerations are examined, with a focus on scalability, compliance, and user adoption challenges. The study argues that while DAO banking may not yet replace centralized financial institutions, it serves as a powerful complementary system, especially in regions with limited banking infrastructure or high levels of financial distrust. The research contributes to the growing discourse on decentralized finance and its real-world applications, offering insights into how DAOs can redefine ownership, control, and transparency in the financial sector. The conceptual model provides a foundation for future empirical studies and prototype development, encouraging stakeholders, developers, and policymakers to collaborate on building decentralized, equitable, and resilient financial ecosystems.