The AFL-CIO, the largest federation of labor unions in the United States, has raised alarm over the Senate’s latest attempt to craft a comprehensive crypto regulatory framework, warning that the proposed legislation could expose workers’ retirement savings to volatile and poorly supervised digital assets.
In a letter sent Tuesday to the Senate Banking Committee, Jody Calemine, director of the AFL-CIO’s Department of Policy, called the Responsible Financial Innovation Act (RFIA) “deeply flawed,” arguing that it provides “the facade of regulation” rather than meaningful oversight.
“The bill would allow the crypto industry to integrate more deeply into our financial system without sufficient safeguards,” Calemine wrote. “That poses serious risks not only to workers’ retirement funds but also to the overall stability of the U.S. economy.”
The RFIA — originally introduced by Senators Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) in 2022 and revised earlier this year — aims to clarify how digital assets are classified and regulated, while dividing oversight responsibilities between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
However, the AFL-CIO argues that the bill’s approach weakens existing investor protections, prioritizing industry growth over consumer safety. The letter adds that the legislation “does little to shield working Americans from crypto’s extreme volatility,” potentially paving the way for pension funds and 401(k) plans to include cryptocurrencies.
Union Flags Dangers for Retirement Accounts
While some lawmakers have argued that digital assets could offer diversification opportunities for long-term investors, Calemine said the opposite is true.
“The Responsible Financial Innovation Act would effectively greenlight retirement plans like 401(k)s and pensions to hold this risky asset,” he warned, emphasizing that such exposure could lead to catastrophic losses if crypto markets were to crash.
The AFL-CIO has long advocated for stricter financial protections for workers’ savings, particularly after the 2008 financial crisis, which wiped out trillions in retirement wealth. Allowing volatile digital assets into federally protected retirement plans, the group says, would be a step backward.
Concerns Over Systemic Risk and Regulatory Loopholes
Calemine also expressed concerns that the RFIA would give traditional banks greater latitude to engage in crypto-related activities, potentially putting the Deposit Insurance Fund (DIF) — which protects consumer bank deposits up to $250,000 — at risk.
“If banks are permitted to custody crypto under this framework, taxpayer-backed insurance funds could be exposed to losses from speculative trading,” he said.
The letter further warns that by “codifying the tokenization of securities and assets,” the bill opens the door for private firms to issue “shadow stocks” — tokenized equity instruments that mimic traditional shares but fall outside SEC oversight.
“This could lead to the creation of unregulated parallel markets — a shadow financial system reminiscent of the pre-2008 era,” Calemine added.
AFL-CIO headquarters in Washington, DC. Source: AFL-CIO
Echoes of the 2008 Financial Crisis
The AFL-CIO drew explicit parallels between the current crypto landscape and the risky financial engineering that triggered the 2008 crisis.
“Banks engaging in crypto-based hedge fund trading activity could be even riskier than the derivatives and mortgage-backed securities that nearly collapsed the economy,” Calemine said. “Congress should not repeat the same mistakes by enabling a poorly regulated and speculative industry to merge with the banking system.”
The union’s letter concluded with a firm call for lawmakers to oppose the Responsible Financial Innovation Act in its current form, urging the Senate to prioritize financial safety, transparency, and accountability.
The RFIA remains in discussion draft status, and while supporters tout it as a balanced framework for crypto innovation, growing opposition from unions and consumer advocates may complicate its path forward.