AFT Raises Alarm Over Legislative Changes to Crypto Regulations
The American Federation of Teachers (AFT) has expressed serious concerns regarding proposed amendments to the legislative framework governing cryptocurrency. In a letter directed to leaders of the Senate Banking Committee, the AFT cautioned that these changes could effectively legitimize the cryptocurrency market while simultaneously undermining protections for investors, thereby increasing the risk to teachers’ pension funds. The union fears that such legislative shifts might expose these funds to precarious assets, heightening the potential for fraud and financial instability.
Concerns About RFIA and Its Impact on Retirement Security
This week, the AFT articulated its apprehensions in a pointed letter to Senate Banking Committee Chair Tim Scott and Ranking Member Elizabeth Warren. Representing over 1.8 million educators and public-sector employees, the union criticized the Responsible Financial Innovation Act (RFIA) for lacking the necessary regulatory clarity and investor protections that have been a priority for lawmakers regarding the digital asset space. The AFT contended that the bill would normalize cryptocurrency assets without sufficiently addressing their inherent volatility, thereby exposing retirement systems to risks that they are specifically designed to mitigate. The letter emphasized, “Instead of offering the much-needed regulatory framework and sensible safeguards, this legislation places working families—who currently have no ties to cryptocurrency—at economic risk, jeopardizing their retirement security.”
Weakening of Pension Protections Under RFIA
A key issue raised by the AFT pertains to how the bill addresses blockchain-based securities. The union argued that the RFIA would permit entities outside the cryptocurrency sector to list their stocks on a blockchain, allowing them to circumvent traditional securities regulations. This development, according to the AFT, could diminish essential safeguards such as mandatory disclosures, registration requirements, and oversight on intermediaries. Such protections are vital for safeguarding pension funds against fraud and mismanagement. By loosening these restrictions, the AFT believes the bill blurs the distinction between regulated securities and unregulated digital assets, potentially making long-term retirement investments more susceptible to market fluctuations.
Labor Unions Unite Against RFIA
The AFL-CIO has also called on lawmakers to reject the Responsible Financial Innovation Act, asserting that poorly regulated cryptocurrency threatens both workers’ retirement funds and the overall stability of the economy, including job security. This concern is not novel, as organized labor has previously voiced similar apprehensions regarding the RFIA, with the AFL-CIO issuing a warning in October about the potential risks to pensions and financial stability.
Democratic Response to RFIA Concerns
The AFT’s warnings come amid congressional efforts to establish a cohesive regulatory framework for digital assets. Many of the union’s criticisms regarding inadequate protections and regulatory shortcomings have surfaced in ongoing Senate discussions about the RFIA. These issues were further highlighted in a leaked Democratic counterproposal that delineates the party’s priorities for amending the bill. Members of the Democratic Banking Committee have raised alarms that the RFIA leaves significant loopholes in the classification of tokens, enabling companies to issue stock-like assets free from the traditional market safeguards. They have advocated for a more transparent SEC review process for new digital assets and ongoing disclosures when management remains involved, along with stringent anti-evasion measures, limits on exempt fundraising, and enhanced protections in secondary markets.
Concerns About National Security and Ethical Standards
National security issues have also emerged in discussions, with Democrats warning that deficiencies in the RFIA could facilitate illicit financial activities, sanctions evasion, and the exploitation of decentralized finance claims to bypass Bank Secrecy Act requirements. Proposed ethical standards would prevent public officials from profiting from digital asset initiatives while serving in office. These ongoing debates highlight the difficulty of achieving a balance between fostering innovation and ensuring investor protection, leaving the future of the RFIA uncertain as lawmakers strive to address gaps that could heighten risks for investors and the overall financial system.
