The nation’s biggest labour federation, the AFL-CIO, has come out against the Senate’s crypto regulation proposal, arguing that the measure lacks sufficient worker protections and could endanger financial stability.
AFL-CIO director Jody Calemine wrote, referring to the RFIA bill, “This bill’s treatment of crypto assets poses risks to both retirement funds and to the overall financial stability of the U.S. economy. As drafted, this bill will enable the crypto industry to operate in wider and deeper ways in our financial system without sufficient oversight or meaningful safeguards.”
The AFL-CIO says the legislation will only augment the burden on FDIC-backed banks
In its letter, the union federation noted that while it favours updating financial regulations to safeguard workers from crypto’s price instability, it believes the Responsible Financial Innovation Act would only do the opposite by encouraging risk exposure through 401(k)s and pension plans.
The federation also cautioned that the bill could heighten systemic vulnerability by permitting FDIC-backed banks and their parent firms to engage in direct crypto trading and holdings. It claimed the proposal would only make banks more vulnerable to losses and failures, increasing the burden on the FDIC’s taxpayer-backed insurance fund. Additionally, it asserted that the bill’s support for legitimising tokenized assets will give private companies a way to issue stock-like products beyond SEC supervision.
According to the organisation, tokenised versions of public stocks would form a parallel, unregulated market that exposes both crypto investors and traditional shareholders to new forms of risk and disrupts financial stability.
The legislation, the group said, would erode critical enforcement powers at both the federal and state levels for pension plans by allowing tokenised securities to sidestep SEC regulation, limiting transparency, and nullifying state protections against fraud. It argued that at the moment, pensions avoid crypto investments due to the uncertainty and volatility surrounding them. However, this bill risks normalising those assets by presenting a veneer of regulation that could mislead investors into believing they are safe.
The RFIA was originally introduced by Senators Lummis and Gillibrand in 2022 and was later revised this year. Currently, the Senate Banking Committee is advancing it as an alternative to the House’s CLARITY Act, proposing a distinct strategy for governing the crypto sector.
The RFIA was first introduced in 2022 by Senators Lummis and Gillibrand, and amended earlier this year. Now, the Senate Banking Committee is pushing it forward as a counter to the House’s CLARITY Act, but with a different approach to regulating the crypto sector.
AFL-CIO believes the bill risks contributing to a financial crisis like that of 2008
The AFL-CIO drew a direct comparison between today’s potential risks and the pre-crisis behaviours of banks that fueled the 2008 collapse. Calemine noted, “Banks engaging in crypto-based hedge fund trading activity, which would be allowed under this regime, could be even riskier than some of the dangerous financial activities conducted before the 2008 financial crisis.”
He explained that the roots of the 2008 crisis lay in unchecked derivatives markets and widespread bank misconduct, which prompted support afterwards for reforms such as Dodd-Frank and the establishment of the Consumer Financial Protection Bureau (CFPB).
He added that the Responsible Financial Innovation Act would increase, rather than reduce, financial exposure, leaving consumers, workers, and the system itself more vulnerable. Noting that current rules already prohibit insured banks from engaging in high-risk crypto trading. He remarked, “As such, this legislation provides the perfect environment for the next financial crisis to germinate.”
Overall, the federation is urging lawmakers to reject the bill to prevent financial disruptions.
