AFL-CIO urges Senate to reject Responsible Financial Innovation Act, warning it exposes workers’ retirement funds to crypto volatility as Trump’s order allows crypto in $12.5T 401(k) portfolios.
The AFL-CIO has urged the Senate Banking Committee to oppose the Responsible Financial Innovation Act, warning that the legislation would expose workers’ retirement funds to crypto volatility while increasing systemic financial risk.
In an October 7 letter to Chairman Scott and Ranking Member Warren, AFL-CIO Director of Government Affairs Jody Calemine stated the bill would greenlight retirement plans like 401(k)s and pensions to hold risky crypto assets rather than insulating workers from instability.
The union federation represents millions of American workers whose retirement security could be affected by the legislation.
The opposition comes as President Trump signed an executive order in August allowing American workers to add alternative assets, including cryptocurrency, to their $12.5 trillion 401(k) portfolios.
More than 90 million Americans participate in employer-sponsored defined-contribution plans, with total US retirement assets valued at $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 swiftly by recognizing FINRA-certified professionals as accredited investors.
The AFL-CIO claimed to have identified two immediate systemic risks in the legislation.
First, the proposal would expand the ability of FDIC-backed banks and bank holding companies to hold and trade crypto assets directly, rather than only on behalf of clients.
This, according to them, would expose banks to a heightened risk of losses and failures, while also putting the FDIC’s taxpayer-backed Deposit Insurance Fund at greater risk.
Second, the bill codifies the tokenization of securities and assets, allowing private companies to create shadow public stock outside SEC oversight.
Calemine warned these blockchain-based shadow stocks, notionally tied to traditional public stock but trading independently, would create new risks for both shadow stockholders and public stockholders who did not opt into unregulated markets.
The union expressed deep concern about the potential impact on the stability of traditional financial markets and institutions, comparing the risks to unregulated derivatives markets that contributed to the 2008 financial crisis.
Source: BIS
The legislation substantially weakens federal and state enforcement tools to police fraud and conflicts of interest, according to the AFL-CIO.
The bill creates avenues for securities issuers to evade SEC regulation through tokenization, reduces public disclosure requirements, and preempts state-level antifraud, securities, and consumer protection laws.
