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The American Federation of Teachers (AFT) sent a letter to Senate Banking Committee leaders warning that proposed changes to the legislative framework would legitimize crypto markets while weakening investor protections, putting teachers’ pension funds at greater risk.

The union argues this shift could expose pension funds to unsafe assets and elevate the risks of fraud and financial instability.

Union Says RFIA Endangers Retirement

The AFT laid out its concerns this week in a sharply worded letter addressed to Senate Banking Committee Chair Tim Scott and Ranking Member Elizabeth Warren. 

The union, which represents more than 1.8 million educators 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 AFT added that the bill would normalize crypto assets without addressing their volatility. It warned that this approach could expose retirement systems to risks they are built to avoid.

“Rather than providing desperately needed regulation and commonsense guardrails, this bill exposes working families—families with no current involvement in or connection to cryptocurrency—to economic risk and threatens the stability of their retirement security,” the letter read. 

A central point of contention is the bill’s treatment of blockchain-based securities. 

Pension Protections Threatened

According to the AFT, the RFIA would allow companies outside the crypto industry to list their stock on a blockchain. This shift, the union said, would let them bypass traditional securities regulations.

The AFT also warned that such a change would weaken safeguards like mandatory disclosures, registration rules, and oversight of intermediaries. These protections play a crucial role in safeguarding pension funds against fraud and mismanagement.

By reducing these guardrails, the AFT believes the bill blurs the line between regulated securities and unregulated digital assets. This could leave long-term retirement portfolios more vulnerable to market instability.

This is not the first time organized labor has raised concerns about the RFIA, following a similar warning from the AFL-CIO in October over pension and financial stability risks.

The union’s warning comes as Congress struggles to create a unified regulatory framework for digital assets. 

Democrats Outline New RFIA Demands

Many of the AFT’s concerns about weak protections and regulatory gaps now appear in Senate debates over the RFIA. 

These concerns were reinforced today in a leaked Democratic counteroffer that outlined the party’s priorities for revising the bill.

Members of the Democratic Banking Committee warned that the RFIA leaves token classification open to serious loopholes. They argued that companies could issue stock-like assets without the safeguards required in traditional markets.

The group also pushed for a clearer SEC review process for new digital assets and ongoing disclosures when managerial teams remain involved. It also backed strict anti-evasion rules, limits on exempt fundraising, and better protections in the secondary market.

National security concerns surfaced as well. 

Democrats cautioned that gaps in the RFIA could enable illicit finance, sanctions evasion, and misuse of decentralization claims to avoid Bank Secrecy Act obligations. Proposed ethics standards would also bar public officials from profiting from digital asset projects while in office.

These disputes underscore the challenge of striking a balance between innovation and investor protection. 

The fate of the RFIA remains uncertain as lawmakers debate reforms aimed at closing gaps that could expose investors and the broader financial system to higher risk.

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