The American Federation of Teachers (AFT) warned in a letter to Senate Banking Committee leaders that the proposed changes in the legal framework would undermine investor protections while legitimizing cryptocurrency markets and put teachers' retirement funds at greater risk.
The union claims that this change could expose retirement funds to unsafe assets and increase the risks of fraud and financial instability.
Union: RFIA Puts Retirement at Risk
AFT conveyed its concerns in a strongly worded letter this week to Senate Banking Committee Chairman Tim Scott and Senior Member Elizabeth Warren.
The union, representing more than one and a half million educators and public employees, argued that the Responsible Financial Innovation Act (RFIA) does not provide the regulatory clarity and investor protection that lawmakers have long wanted for the digital asset sector.
AFT also added that this bill ignores the volatility of cryptocurrency assets while normalizing them. It warned that such an approach could expose retirement systems to the risks they are trying to mitigate.
The letter included the following statements: 'This law leaves working families, who have no connection to cryptocurrency, facing economic risk instead of providing the desperately needed regulation and prudent protective barriers, and threatens the stability of their retirement security,' it said.
At the center of the tension is the bill's approach to blockchain-based securities.
Retirement Rights at Risk
According to AFT, under the RFIA, companies outside the crypto sector could list their shares on a blockchain. The union argues that this change would lead to a circumvention of traditional securities regulations.
AFT also warned that such a change would weaken protections such as mandatory disclosures, registration rules, and broker-dealer oversight. These measures play a vital role in protecting retirement funds against fraud and mismanagement.
When these firewalls are reduced, AFT believes that the bill will blur the line between regulated securities and unregulated digital assets. This could make long-term retirement portfolios more susceptible to market instability.
This is not the first time the organized labor community has expressed concerns about the RFIA: A similar warning was shared by the AFL-CIO in October regarding retirement and financial stability risks.
The union's warning comes as Congress attempts to create a unified regulatory framework for digital assets.
Democrats Unveil New RFIA Demands
AFT's concerns about weak protections and gaps in regulations are now being voiced in the RFIA discussions in the Senate.
The leaked counterproposal from Democrats today once again highlighted these concerns about the party's priorities for revising the bill.
Members of the Democratic Banking Committee stated that the RFIA leaves the token classification facing serious shortcomings. They claimed that the law allows companies to issue stock-like assets without the protections required in traditional markets.
The group also requested a clearer SEC review process for new digital assets and ongoing disclosures as long as managers play an active role in the project. Furthermore, strict rules, limits on exempt fundraising, and strong protections in the secondary market were also demanded to prevent illicit escapes.
National security concerns have also been raised.
Democrats stated that the gaps in the RFIA provide a ground for illicit financing, sanctions evasion, and claims of decentralization to escape bank privacy laws. It was also mentioned that ethical rules would be proposed to prevent public officials from profiting from digital asset projects while in office.
These discussions once again highlight how difficult it is to strike a balance between innovation and investor protection.
The fate of the RFIA remains uncertain: Lawmakers continue to discuss reforms that could close gaps that expose investors and the overall financial system to higher risks.
