The American Federation of Teachers (AFT) has issued a stark warning to leaders of the Senate Banking Committee regarding the implications of proposed changes to the legislative framework surrounding cryptocurrencies. In a letter directed to Chair Tim Scott and Ranking Member Elizabeth Warren, the AFT expressed concern that the Responsible Financial Innovation Act (RFIA) would inadvertently legitimize crypto markets while simultaneously eroding essential investor protections, thus increasing risks for teachers” pension funds.
The union, which represents over 1.8 million educators and public-sector workers, articulated that the RFIA lacks the regulatory clarity and investor safeguards that have been sought by lawmakers for the digital asset sector. The AFT criticized the bill for normalizing cryptocurrencies without adequately addressing their notorious volatility, potentially exposing retirement systems to risks that they are designed to mitigate.
Among the primary concerns highlighted by the AFT is the bill”s approach to blockchain-based securities. They argue that the RFIA would enable companies outside of the crypto sector to list their shares on a blockchain, allowing them to circumvent established securities regulations. This change could weaken crucial safeguards such as mandatory disclosures, registration requirements, and oversight of intermediaries, which are vital for protecting pension funds from fraud and mismanagement.
By diminishing these regulatory guardrails, the AFT fears that the RFIA blurs the line between regulated securities and unregulated digital assets, rendering long-term retirement portfolios more susceptible to market instability. This apprehension is not isolated; the AFL-CIO previously issued a similar warning concerning the RFIA”s implications for pension and financial stability.
As Congress continues to grapple with the challenge of establishing a cohesive regulatory framework for digital assets, the AFT”s concerns have gained traction in ongoing Senate discussions. Recent leaks from Democratic members of the Banking Committee reveal a counterproposal that emphasizes the need for stronger protections within the RFIA.
Democratic lawmakers have raised alarms about potential loopholes in token classification that could allow companies to create stock-like instruments lacking the safeguards typical in traditional markets. They are advocating for a more transparent review process by the SEC for new digital assets, alongside ongoing disclosure requirements for managing teams. Additional proposals include strict anti-evasion measures, limits on exempt fundraising, and enhanced protections for secondary markets.
National security issues have also been flagged, with concerns that deficiencies in the RFIA could facilitate illicit financing and sanctions evasion, as well as enable misuse of decentralization claims to bypass Bank Secrecy Act obligations. Proposed ethical standards would prevent public officials from profiting from digital asset initiatives while in office.
These discussions highlight the ongoing struggle to balance innovation in the cryptocurrency space with the imperative of investor protection. The future of the RFIA hangs in the balance as lawmakers continue to debate necessary reforms aimed at closing gaps that could expose investors and the broader financial system to elevated risks.
