The American Federation of Teachers (AFT) sent a letter to the chairman of the Senate Banking Committee warning that the proposed changes to legislation could legalize cryptocurrency markets while simultaneously undermining investor protections, putting teachers' pension funds at greater risk.
The union argues that the change could expose pension funds to unsafe assets and increase the risk of fraud and financial instability.
The union says that RFIA jeopardizes pensions.
AFT expressed its concerns this week in a sharply worded letter addressed to Senate Banking Committee Chairman Tim Scott and ranking Democrat Elizabeth Warren.
The federation, representing over 1.8 million education and public sector workers, noted that the Responsible Financial Innovation Act (RFIA) does not provide the regulatory clarity and investor protection that lawmakers have long sought for the digital asset sector.
The AFT added that the bill normalizes crypto assets without addressing their volatility. The federation warned that such a line would expose pension systems to risks they are meant to avoid.
"Instead of providing the desperately needed regulation and sensible safeguards, this bill exposes working families—those with no connection to cryptocurrency—to financial risk and threatens the stability of their retirement security," the letter stated.
A key point of contention relates to the bill's approach to blockchain-based securities.
Pension protections under threat
According to the RFIA, it would allow companies that do not belong to the crypto industry to list their shares on the blockchain. This change would enable bypassing traditional securities regulation.
The AFT also warned that such a change would weaken safeguards like mandatory disclosures, registration requirements, and broker oversight. These protective mechanisms are essential for protecting pension funds from fraud and abuse.
The breakdown of these safeguards could, according to the AFT, blur the line between regulated securities and unregulated digital assets. In this case, long-term pension portfolios would be more susceptible to market volatility.
The organized labor movement has previously expressed concerns about the RFIA; the AFL-CIO issued a similar warning in October regarding the risks to pension funds and financial stability.
The federation's warning was issued at a time when Congress is trying to create a unified regulatory framework for digital asset markets.
Democrats introduce new RFIA requirements
Many of the AFT's concerns about insufficient protection and regulatory gaps are now visible in Senate discussions on the RFIA.
These concerns were highlighted today in a leaked Democratic counterproposal that outlined the party's key objectives for amending the bill.
Members of the Democratic banking committee warned that the RFIA leaves the classification of tokens vulnerable to serious loopholes. They argued that companies could offer stock-like assets without the requirements of traditional markets.
The group also emphasized a clearer SEC review process for new digital assets and ongoing disclosure obligations when management still has influence. Additionally, strict anti-evasion rules, restrictions on exempt fundraising, and better protection in secondary markets were supported.
National security concerns also emerged.
Democrats warned that gaps in the RFIA could allow for illegal financing, evasion of sanctions, and abuse of decentralized structures to circumvent banking secrecy law requirements. Under the proposed ethical rules, officials would be prohibited from benefiting from digital asset projects while in office.
These disagreements highlight the challenge of finding a balance between innovation and investor protection.
The future of the RFIA remains uncertain as lawmakers discuss reforms aimed at preventing greater risks to investors and the entire financial system.