AFL-CIO Opposes Senate Crypto Bill: The Battle Over Retirement Funds and Digital Asset Regulation

 A Critical Juncture for Crypto Regulation

October 8, 2025 marks a significant moment in American cryptocurrency regulation. The AFL-CIO, representing 12.5 million workers across 60 unions, has formally opposed the Senate's Responsible Financial Innovation Act (RFIA), raising fundamental questions about how digital assets should intersect with traditional retirement systems.

This isn't merely a technical regulatory dispute—it's a referendum on whether cryptocurrency has matured sufficiently to enter mainstream financial products that millions of Americans depend upon for retirement security.

Understanding the Responsible Financial Innovation Act

The RFIA represents the Senate's most ambitious attempt to create comprehensive cryptocurrency regulation. Sponsored by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY), the bill was originally introduced in 2022 and significantly revised in 2025.

The Bill's Core Objectives:

The legislation seeks to establish clear regulatory boundaries between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Currently, jurisdictional ambiguity creates uncertainty for crypto businesses and investors alike.

The RFIA proposes defining when digital assets qualify as securities (SEC jurisdiction) versus commodities (CFTC jurisdiction). This distinction determines which regulatory framework applies, affecting everything from registration requirements to trading venue rules.

The bill also addresses stablecoin regulation, custody standards, tax treatment of digital assets, and cybersecurity requirements for crypto intermediaries.

Legislative Timeline:

• June 7, 2022: Original RFIA introduced
• July 17, 2025: House passes CLARITY Act (294-134)
• July 22, 2025: Senate releases initial RFIA discussion draft
• September 5, 2025: Senate Banking Committee releases 182-page expanded draft
• September 9, 2025: Twelve Senate Democrats release alternative framework
• October 7, 2025: AFL-CIO sends opposition letter to Senate Banking Committee
• Expected October 2025: Senate Banking Committee markup vote

The House's CLARITY Act currently awaits Senate consideration, though the Senate appears focused on developing its own approach through the RFIA.

The AFL-CIO's Opposition: Three Core Arguments

In a letter authored by Director of Government Affairs Jody Calemine, the AFL-CIO articulates specific concerns about the RFIA's implications for American workers.

1. Retirement Fund Exposure to Volatile Assets

The union's primary concern centers on provisions that would allow 401(k) plans and pension funds broader access to cryptocurrency custody and holdings.

Current regulatory frameworks generally limit retirement plan exposure to volatile or speculative assets. The AFL-CIO argues the RFIA would weaken these protections, enabling plan sponsors to include crypto without sufficient fiduciary safeguards.

Calemine's letter states: "Rather than protecting workers from the volatility of the asset class, [the bill] increases workers' exposure by allowing retirement plans like 401(k)s and pensions to hold these risky assets."

The concern isn't that crypto exposure would be mandatory, but that the regulatory pathway would be eased, potentially creating pressure on plan administrators to include crypto to remain competitive or satisfy participant demand—even when inappropriate for risk-averse retirement savings.

2. Banking System Exposure Through Custody

The RFIA would permit banks to custody cryptocurrency for clients. The AFL-CIO warns this could expose the Federal Deposit Insurance Corporation (FDIC) fund to crypto market volatility.

The FDIC insures bank deposits up to $250,000 per account, protecting consumers if banks fail. This insurance is funded by premiums paid by banks and backed by the full faith and credit of the US government—ultimately, taxpayer support.

If banks custody volatile crypto assets and suffer losses through market downturns, hacks, or operational failures, the AFL-CIO argues these losses could threaten bank solvency, potentially requiring FDIC intervention funded by taxpayers.

The union specifically criticizes provisions allowing "banks engaging in crypto-based hedge fund trading activity," comparing such practices to risky behaviors that precipitated the 2008 financial crisis.

3. Tokenization as "Shadow Securities Markets"

Perhaps the most technical but potentially far-reaching concern involves tokenization provisions.

The RFIA explicitly addresses tokenization—representing real-world assets like stocks, bonds, or real estate as digital tokens on blockchains. Proponents argue tokenization could democratize access to investments, reduce transaction costs, and increase market efficiency.

The AFL-CIO contends that the bill's tokenization framework would allow private companies to create tokenized securities outside SEC oversight, effectively establishing "shadow public stock" markets with lighter regulation than traditional securities markets.

This echoes concerns from the 2008 crisis, when complex derivative instruments traded in lightly regulated or unregulated markets created systemic risks that ultimately required massive government intervention.

The Counterarguments: Industry and Regulatory Clarity

Supporters of the RFIA and similar legislation present compelling counterarguments.

The Regulatory Vacuum Problem

Currently, cryptocurrency operates in substantial regulatory ambiguity. The SEC and CFTC have issued guidance and brought enforcement actions, but comprehensive legislative frameworks don't exist.

This ambiguity creates multiple problems:

• Compliance Uncertainty: Legitimate businesses struggle to understand which rules apply, creating legal risk that discourages responsible operators while enabling bad actors who ignore rules entirely.
• Regulatory Arbitrage: Without clear US frameworks, crypto businesses either operate in gray areas domestically or move offshore entirely, taking jobs, tax revenue, and regulatory control with them.
• Consumer Confusion: Investors lack clear information about which entities are regulated, what protections exist, and how to distinguish legitimate platforms from scams.

Supporters argue comprehensive legislation, even if imperfect, provides benefits by establishing clear rules that both industry and regulators can follow.

Innovation and Competitiveness

The blockchain and cryptocurrency industry argues that excessive caution or hostile regulation will cede American leadership in emerging financial technology to countries with more accommodating frameworks.

Singapore, Switzerland, the UAE, and other jurisdictions have created clear regulatory pathways for crypto businesses, attracting significant investment and talent. Industry advocates warn that failure to provide similar clarity risks American irrelevance in digital finance innovation.

Fiduciary Standards Already Exist

Regarding retirement fund concerns, supporters note that existing fiduciary duty requirements under ERISA (Employee Retirement Income Security Act) already obligate plan administrators to act in participants' best interests.

Plan fiduciaries must evaluate any investment's risk-reward profile, appropriateness for participants' circumstances, and role within diversified portfolios. These duties don't disappear if crypto becomes available as an option.

Additionally, making crypto available doesn't mean forcing exposure. Participants could opt out if they judge the risk inappropriate for their circumstances.

The Broader Coalition Against the Bill

The AFL-CIO joins other organizations expressing skepticism about current crypto legislation:

Americans for Financial Reform: A coalition of consumer, civil rights, labor, and business groups concerned about financial system stability and consumer protection.

Consumer Reports: The product testing and consumer advocacy organization opposes similar House legislation, citing inadequate consumer safeguards.

Transparency International: The anti-corruption organization warns that legislation doesn't adequately address money laundering and sanctions evasion risks.

These groups previously opposed the House's CLARITY Act, which nonetheless passed with substantial bipartisan support (294-134) in July 2025.

Support for Regulation

Conversely, groups supporting regulatory clarity include:

Managed Funds Association: Representing alternative investment managers, this group views clear rules as enabling responsible institutional participation.

Various Crypto Industry Groups: Unsurprisingly, blockchain and cryptocurrency companies support frameworks that provide operating clarity while maintaining innovation space.

Some Bipartisan Legislators: The original RFIA sponsors (Lummis-R, Gillibrand-D) demonstrate bipartisan recognition that some regulatory framework is necessary, even if disagreement exists about specific provisions.

Comparing to 2008: Is the Analogy Fair?

The AFL-CIO's comparison to the 2008 financial crisis merits scrutiny.

Similarities:

• Complexity: Like mortgage-backed securities and collateralized debt obligations in 2008, cryptocurrency and tokenized assets are complex instruments that average investors struggle to understand.
• Interconnection: The 2008 crisis demonstrated how losses in one sector (housing) propagated through financial institutions holding related assets. Similarly, bank custody of crypto could create transmission channels from crypto markets to traditional banking.
• Regulatory Gaps: Pre-2008, many risky financial activities occurred in lightly regulated or unregulated spaces. Critics argue crypto legislation risks recreating similar gaps.

Differences:

• Scale: The 2008 crisis involved trillions of dollars in housing-related assets integrated throughout the financial system. Current cryptocurrency market capitalization (~$2.8 trillion total; $2.7 trillion for BTC and ETH combined) remains smaller, and integration with traditional finance remains limited.
• Known Volatility: Crypto's volatility is obvious and widely discussed. Pre-2008, many sophisticated investors didn't recognize risks in supposedly safe mortgage-backed securities. This transparency may provide some protection.
• Regulatory Attention: Unlike pre-2008 housing finance, cryptocurrency receives enormous regulatory attention. Multiple agencies actively scrutinize the space, potentially catching problems earlier.

Whether the comparison is apt depends partly on one's assessment of crypto's future trajectory. If crypto integration into mainstream finance accelerates, systemic risk concerns grow more legitimate.

What Happens Next: The Legislative Path Forward

The Senate Banking Committee aims to vote on RFIA provisions related to SEC oversight before the end of October 2025. The Senate Agriculture Committee is expected to release its discussion draft covering CFTC-related provisions and vote in October as well.

Senator Lummis has suggested a full Senate floor vote could occur as soon as November 2025, though this timeline depends on successful committee action and leadership prioritization.

Bipartisan Negotiations

Twelve Senate Democrats released their own framework on September 9, 2025, signaling willingness to negotiate on crypto market structure. Senator Lummis has indicated that Democrats and Republicans are being paired on specific sub-issues to maximize bipartisan agreement.

However, achieving consensus faces challenges. Democrats may demand stronger consumer protections, stricter custody standards, and more robust oversight—precisely the areas the AFL-CIO criticizes as inadequate. Republicans may resist provisions they view as stifling innovation or creating regulatory burdens.

The House-Passed CLARITY Act

Meanwhile, the House's CLARITY Act awaits Senate consideration. The Senate could theoretically take up the House bill directly, but appears committed to developing its own approach through the RFIA.

If the Senate passes different legislation, the bills would need reconciliation through conference committee—a process that could take months and result in substantial changes.

Implications for the Crypto Industry and Investors

The outcome of this legislation will shape cryptocurrency's role in American finance for years.

For Retirement Savers:

If the AFL-CIO's concerns are ignored and the bill passes as drafted, workers may gain access to crypto through 401(k)s and pensions—for better or worse. Those comfortable with crypto's risks might welcome this option. Those skeptical might worry about pressure to include crypto despite personal reluctance.

If the AFL-CIO's concerns result in stricter limitations, retirement plans would maintain limited crypto exposure, protecting conservative savers but potentially denying access to those who want diversified crypto exposure.

For Crypto Businesses:

Clear regulatory frameworks—even with compliance costs—generally benefit legitimate businesses by reducing legal uncertainty and enabling confident long-term planning.

However, if final legislation includes restrictions the industry views as overly burdensome, businesses might still face incentives to operate offshore or in regulatory gray areas.

For Innovation:

The regulatory approach will influence whether blockchain innovation flourishes domestically or migrates to more accommodating jurisdictions.

Striking the right balance between protection and innovation remains the fundamental challenge—one with no perfect solution.

Conclusion: The Continuing Debate

The AFL-CIO's opposition to the RFIA highlights enduring tensions in cryptocurrency regulation. Worker advocates fear inadequate protection from volatile, emerging assets. Industry advocates seek regulatory clarity enabling responsible growth. Regulators must balance innovation against stability.

No outcome will satisfy everyone. The question is whether legislators can craft frameworks providing sufficient consumer protection while enabling beneficial innovation—and whether Americans can agree on where that balance lies.

As this legislative process unfolds, staying informed with accurate, comprehensive information becomes essential. For real-time cryptocurrency data, market analytics, and regulatory news tracking, visit CrypRank at https://www.cryprank.com/.

The debate over crypto regulation will define how digital assets integrate into American finance. The stakes are high, and the outcome remains uncertain. One thing is clear: this conversation is far from over.