American Workers’ Retirement Savings at Risk as Major Union Sounds Alarm on New Crypto Bill

• The AFL-CIO has urged the Senate Banking Committee to reject the Responsible Financial Innovation Act. 
• The union warns that the bill would allow retirement plans, such as 401(k)s, to hold risky cryptocurrency assets, exposing workers’ savings to market volatility.

The AFL-CIO has called on the Senate Banking Committee to reject the Responsible Financial Innovation Act. The labour federation argues the legislation would expose workers’ retirement savings to cryptocurrency market volatility while creating new systemic financial risks.

In a letter dated October 7, addressed to Chairman Tim Scott and Ranking Member Elizabeth Warren, AFL-CIO Director of Government Affairs Jody Calemine outlined significant concerns. The union federation represents millions of American workers whose retirement security hangs in the balance.

The opposition letter warns that the bill would permit retirement plans, including 401(k)s and pensions, to hold cryptocurrency assets. Calemine stated this would remove protections that currently shield workers from market instability.

The criticism emerged as President Trump signed an executive order in August allowing American workers to include alternative assets in their 401(k) portfolios. The order affects retirement plans valued at $12.5 trillion. More than 90 million Americans participate in employer-sponsored defined-contribution plans. Total U.S. retirement assets reached $43.4 trillion as of March 31, 2025.

House Financial Services Committee Chairman French Hill and Subcommittee Chairman Ann Wagner urged SEC Chair Paul Atkins on September 22 to implement the directive quickly. They requested recognition of FINRA-certified professionals as accredited investors.

Banking System Exposure and Shadow Markets

The AFL-CIO identified two primary systemic risks within the proposed legislation. The bill would expand the authority of FDIC-backed banks and bank holding companies to hold and trade crypto assets directly. Current regulations limit banks to handling cryptocurrency transactions on behalf of clients.

Direct crypto holdings would expose banks to heightened loss risks and potential failures, according to the union. This change would place the FDIC’s taxpayer-backed Deposit Insurance Fund in jeopardy.

The legislation also codifies tokenization of securities and assets. Private companies could create blockchain-based versions of public stock trading outside SEC oversight. Calemine warned these tokenized assets would operate as shadow stocks, creating dual markets for the same underlying securities.

The AFL-CIO compared these risks to unregulated derivatives markets that contributed to the 2008 financial crisis. Shadow stockholders and traditional public stockholders would both face new uncertainties, the union argued.

Reduced Regulatory Enforcement Powers

The bill substantially weakens federal and state enforcement capabilities, according to the AFL-CIO analysis. Securities issuers could evade SEC regulation through tokenization mechanisms. The legislation reduces public disclosure requirements and preempts state-level antifraud laws.

Most pension funds currently avoid cryptocurrency due to associated risks. However, Calemine claimed the bill creates a “facade of regulation” that could mainstream crypto in retirement portfolios. Workers might perceive these assets as safer than they actually are.

The draft Responsible Financial Innovation Act was released in July by Senate Banking Chair Tim Scott. Co-sponsors include Senators Cynthia Lummis, Bill Hagerty, and Bernie Moreno. The legislation proposes that digital assets called “ancillary assets” are not inherently securities.

The bill attempts to resolve jurisdictional conflicts between the SEC and CFTC. Most digital assets would be regulated as commodities under CFTC authority. The SEC would retain oversight of investment contracts and investor protection.

A revised September 7 draft introduced protections for decentralised finance developers and emerging blockchain sectors. The proposal includes the formation of a Joint Advisory Committee on Digital Assets comprising SEC and CFTC members.

Developers contributing to decentralised protocols would not automatically fall under traditional financial regulations if protocols lack central control. Validators, liquidity providers, and wallet builders receive similar exemptions. The revised draft defines airdrops, staking rewards, and liquid-staking outputs as “gratuitous distributions” rather than securities offerings.

SEC Chair Paul Atkins announced last month that the agency would end “regulation by enforcement.” Firms now receive preliminary notices of technical violations with up to six months to address issues before enforcement actions. Atkins dropped several high-profile cases inherited from Gary Gensler’s tenure and launched a Crypto Task Force.