MFA Outlines Recommendations for Digital Asset Framework

The Managed Funds Association ("MFA") urged the Senate Banking Committee to adopt several recommendations on proposed digital asset market structure legislation.  

In a letter responding to the Banking Committee’s request for information on digital asset market structure, the MFA stated that while blockchain and tokenization can enhance capital formation, liquidity, and collateral efficiency, they also pose complex regulatory questions. The MFA cautioned that policymakers must distinguish between privately traded and publicly traded securities and avoid overlapping or duplicative requirements that could hinder market growth.

The MFA made the following recommendations:

1. Empower regulators with flexibility. The MFA urged Congress to authorize the SEC and CFTC to create clear, principles-based rules for digital assets, explaining that a flexible framework will allow regulators to respond to evolving technologies without stifling innovation or undermining investor protections.
2. Refine SEC rules for tokenization. The MFA asked Congress to direct the SEC to adjust its rulebook to accommodate tokenized public and private securities, stressing that these assets should generally be subject to the same safeguards as traditional securities unless meaningful differences warrant alternative treatment.
3. Ensure consistent product treatment. The MFA cautioned against regulatory or tax disparities between blockchain-based and traditional products, noting that consistent treatment across asset classes would prevent arbitrage, reduce market distortions, and promote fair competition.
4. Avoid duplicative regulation. The MFA warned that overlapping SEC and CFTC oversight, including dual registration, increases costs and burdens for firms without delivering added protections, and recommended reducing duplicative requirements.
5. Unify custody standards. The MFA recommended that Congress grant the CFTC authority to adopt custody rules for digital assets under its jurisdiction while requiring coordination with the SEC to provide clarity and enable safe, scalable custody solutions.
6. Tailor AML requirements. The MFA supported robust anti-money laundering controls but emphasized that AML rules for digital assets should align with traditional finance and be appropriately scoped for private fund structures to ensure proper oversight without unnecessary costs.