The American Federation of Teachers (AFT) has sent a letter to Senate Banking Committee leaders warning that proposed changes to the regulatory framework could legitimize the cryptocurrency market and weaken investor protections, putting teachers' retirement funds at greater risk.
The federation argues that this change could expose pension funds to unsafe assets, increasing the risk of fraud and financial instability.
The union argues that RFIA endangers pensions.
This week, AFT clarified its position in a letter to Senate Banking Committee Chairman Tim Scott and Senior Fellow Elizabeth Warren.
This organization, representing more than 1.8 million teachers and public workers, argues that the Responsible Finance Innovation Act (RFIA) has not provided the regulatory clarity or investor protections that lawmakers have long desired for the digital asset sector.
AFT added that the bill could make digital assets "normal," although it still doesn't address their high volatility. The federation also warned that this approach could expose pension systems to risks they Capital have avoided.
“Instead of providing necessary regulations and reasonable protections, this bill puts working families—who currently have no involvement with cryptocurrencies—at risk of financial hardship and threatens their retirement financial stability,” the AFT letter stated.
One major point of contention is how the bill handles blockchain-based securities .
Pension protection is under threat.
According to AFT, the RFIA will allow companies outside the cryptocurrency sector to list their shares on the blockchain . The federation argues that this helps them "circumvent" traditional securities regulations.
AFT also warned that this change could weaken safeguards such as disclosure requirements, mandatory registration processes, and oversight of intermediaries. These measures are crucial for protecting pension funds from fraud and misconduct.
According to AFT, reducing these measures would blur the lines between regulated securities and unregulated digital assets. This could leave long-term retirement portfolios more vulnerable to market volatility.
This is not the first time unions have voiced concerns about the RFIA, following a similar warning in October from the AFL-CIO about risks to pension funds and financial stability.
This warning from the organization comes as Congress is still struggling to build a unified legal framework for digital assets.
The Democratic Party has issued new demands to RFIA.
Many of AFT's concerns about weak investor protection and regulatory loopholes have surfaced in Senate debates on the RFIA .
Today, these concerns are further reinforced by a leaked amendment proposal from the Democratic side, which underscores their priorities for amending the bill.
Some Democratic members of the Banking Committee warned that the RFIA still leaves many "loopholes" regarding Token classification. They argued that the company could issue assets similar to stocks, but without adhering to the strict safeguards found in traditional markets.
This group also proposed a more transparent SEC vetting process for new digital assets, along with continued transparency while the management team remains involved. Additionally, they advocated for regulations to prevent circumvention of the law, limits on exempted Capital activities, and enhanced protection in the secondary market.
National security concerns have also been raised.
Democrats warn that RFIA's loopholes could facilitate illicit financial activities, circumvent sanctions, and abuse claims of decentralization to evade accountability under the Bank Secrecy Act. Additionally, the proposed ethical standards would prohibit public officials from profiting from digital asset projects while in office.
These debates highlight the challenge of balancing innovation and investor protection.
The fate of the RFIA remains uncertain as lawmakers continue to debate amendments to close loopholes and avoid putting investors and the entire financial system at greater risk.
