The American Federation of Teachers (AFT) sent a letter to Senate Banking Committee leaders warning that the proposed changes to the legislative framework would legitimize cryptocurrency markets and weaken investor protections, putting teachers' pension funds at greater risk.
The union argues that this shift could expose pension funds to unsafe assets and increase the risks of fraud and financial instability.
The union says the RFIA jeopardizes retirement
AFT expressed its concerns this week in a sharply worded letter to Senate Banking Committee Chairman Tim Scott and senior committee member Elizabeth Warren.
The union, representing over 1.8 million teachers and public sector workers, argued that the Responsible Financial Innovation Act (RFIA) fails to provide the regulatory clarity and investor protections that lawmakers have long sought for the digital asset sector.
The union added that the bill would tokenize digital assets without addressing their volatility. It warned that this approach could expose pension systems to risks they were designed to avoid.
"Instead of providing the necessary regulation and logical barriers, this law exposes working families - families currently unrelated to digital currencies - to economic risks and threatens the stability of their retirement security," the message stated.
A central point of contention is the bill's treatment of blockchain-based securities.
Protecting threatened pensions
According to AFT, the RFIA would allow companies outside the digital currency industry to list their shares on the blockchain. The union stated that this shift would allow them to bypass traditional securities regulations.
AFT also warned that such a change would weaken safeguards like mandatory disclosures, registration rules, and oversight of intermediaries. These protections play a vital role in safeguarding pension funds from fraud and mismanagement.
By reducing these barriers, AFT believes the bill blurs the line between regulated securities and unregulated digital assets. This could make long-term pension portfolios more susceptible to market instability.
This is not the first time organized labor has raised concerns about the RFIA, following a similar warning from AFL-CIO in October regarding retirement risks and financial stability.
The union's warning comes as Congress struggles to establish a unified regulatory framework for digital assets.
Democrats plan new demands for rugby union
Many of AFT's concerns about weak protections and regulatory gaps are now evident in Senate discussions about the RFIA.
These concerns were reinforced today in a counter-presentation from Democrats that was leaked, outlining the party's priorities for reviewing the bill.
Democratic members of the banking committee warned that the RFIA leaves the classification of tokens exposed to significant loopholes. They argued that companies could issue stock-like assets without the required safeguards in traditional markets.
The group also pushed for a clearer review process by the Securities and Exchange Commission for new digital assets and ongoing disclosures while management teams remain involved. They also supported strict rules against investment evasion, limits on exempt fundraising, and better protections in the secondary market.
Concerns related to national security have also emerged.
Democrats warned that loopholes in the RFIA could enable illicit financing, sanctions evasion, and misuse of decentralization claims to avoid obligations under the Bank Secrecy Act. Additionally, the proposed ethical standards would prevent public officials from profiting from digital asset projects while in office.
These disputes underscore the challenge of balancing innovation with investor protection.
The fate of the RFIA remains uncertain as lawmakers discuss reforms aimed at closing the gaps that could expose investors and the broader financial system to higher risks.