The American Federation of Teachers (AFT) sent a letter to Senate Banking Committee leaders warning that the proposed changes to the legal framework would legalize the cryptocurrency market while weakening investor protections and exposing teachers’ pension funds to greater risk.
Unions argue the changes could expose pension funds to risky assets and increase the risk of fraud and financial instability.
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Union claims RFIA puts retirement at risk
AFT expressed its concerns this week in a sharply worded letter to Senate Banking Committee Chairman 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 Finance and Innovation Act (RFIA) fails to provide the regulatory clarity and investor protections that lawmakers have long sought in the digital asset space.
AFT added that the bill normalizes crypto assets without addressing their volatility. He warned that this approach could expose retirement plans to the risks they were built to avoid.
“Rather than providing much-needed regulation or common-sense guardrails, this bill exposes working households – households with no current involvement or involvement in cryptocurrencies – to financial risk and threatens the stability of their retirement security,” the letter reads.
A central issue is the bill’s treatment of blockchain-based securities.
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Pension protection threatened
According to AFT, the RFIA will allow companies outside the crypto industry to list their stocks on the blockchain. The change will allow them to circumvent traditional securities regulations, the union said.
The AFT also warned that such changes would weaken safeguards such as mandatory disclosure, registration rules and intermediary oversight. These protections play an important role in protecting pension funds from fraud and mismanagement.
By reducing these guardrails, AFT believes the bill blurs the line between regulated securities and unregulated digital assets. This can make long-term retirement portfolios more vulnerable to market volatility.
This is not the first time organized labor has raised concerns about the RFIA, after the AFL-CIO issued a similar warning in October about pension and financial stability risks.
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The union’s warning comes as Congress struggles to create a uniform regulatory framework for digital assets.
Democrats outline new RFIA requirements
Many of the AFT’s concerns about weak protections and regulatory gaps are now manifesting in the Senate debate over the RFIA.
Those concerns were reinforced today with the leak of a Democratic counterproposal outlining the party’s priorities for amending the bill.
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Members of the Democratic Banking Committee warned that the RFIA leaves significant loopholes in the classification of tokens. They argued that companies could issue assets like stock without the safeguards required in traditional markets.
The group also called for a clearer SEC review process for new digital assets and continued disclosure when management teams remain involved. It also supported strict anti-tax evasion rules, limits on exempt financing, and stronger protections in the secondary market.
National security concerns also surfaced.
Democrats warned that gaps in the RFIA could allow illegal lending, sanctions evasion, and abuse of decentralization claims to avoid Bank Secrecy Act obligations. The proposed ethical standards would also prohibit public officials from profiting from digital asset projects while in office.
These disputes highlight the challenge of balancing 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 risks.
