The American Federation of Teachers (AFT) has sent a letter to the leaders of the Senate Banking Committee warning that proposed changes to legislation could make cryptocurrency markets more accepted but also weaken protections for investors. This could mean that teachers' pension funds become more exposed to risks.
The union argues that these changes could lead pension funds to invest in unsafe assets and that the risk of fraud and economic instability increases.
The union says that RFIA threatens pensions.
AFT presented its concerns this week in a sharply worded letter to Senate Banking Committee Chair Tim Scott and Ranking Member Elizabeth Warren.
The union, representing over 1.8 million teachers and public employees, believes that the Responsible Financial Innovation Act (RFIA) does not provide clear regulations or sufficient protections for investors in the digital asset sector.
AFT also stated that the bill would normalize crypto without addressing the issues related to value fluctuations. They warned that this could expose pension systems to risks they were designed to avoid.
"Instead of providing necessary regulations and sensible protections, this bill exposes working families – families who today have no connection to cryptocurrency – to economic risk and threatens their security in retirement," the letter states.
One important issue is how the bill treats blockchain-based securities.
Pension protections are threatened.
According to AFT, RFIA would allow companies outside the crypto industry to list their stock on a blockchain. This means, according to the union, that they can avoid standard securities regulations.
AFT also warned that such a change could weaken important protections, such as information requirements, registration rules, and oversight of actors. Such protections are crucial to safeguard pension funds against fraud and mismanagement.
If these protections are removed, AFT believes the line will become unclear between traditional securities and unregulated digital assets. This could make pension funds and long-term investments more vulnerable when the market becomes volatile.
This is not the first time that unions have expressed concerns about RFIA. AFL-CIO issued a similar warning in October regarding risks to pensions and economic stability.
The union's warning comes as Congress struggles to create clear regulations for digital assets.
Democrats list new RFIA requirements.
Many of AFT's concerns about weak protections and gaps in the regulations are now surfacing in Senate discussions about RFIA.
These concerns were amplified today when a leaked Democratic counterproposal showed which parts the party wants the bill to be amended on.
Several members of the Democrats' Banking Committee warned that RFIA leaves the classification of tokens open to serious gaps. They argued that companies could issue stock-like assets without the protections present in traditional markets.
The group also proposed clearer SEC oversight for new digital assets and requirements to disclose information when corporate management remains active. They also support strict rules against fraud, limitations on exemptions from capital raising, and better protections in the secondary market.
National security issues were also highlighted.
Democrats warned that gaps in RFIA could lead to money laundering, circumvention of sanctions, and that some may use decentralization to evade the regulations in the Bank Secrecy Act. They also proposed ethical rules preventing politicians from profiting from digital asset projects while serving as public officials.
These conflicts demonstrate how difficult it is to find the right balance between innovation and investor protection.
It is still unclear what is happening with RFIA, as lawmakers continue to discuss changes to close gaps that could increase risks for investors and the entire financial system.
