American Federation of Labor Calls Senate Crypto Bill ‘Regulatory Facade’

The largest federation of labor unions in the United States has put the brakes on the Senate’s most ambitious crypto legislation to date, warning that the bill lacks worker protections and would allow the industry to “operate broader and deeper” without sufficient oversight.

AFL-CIO Government Affairs Director Jody Calemine accused the Responsible Financial Innovation Act of providing only a “regulatory facade” while actually weakening consumer protections, in a letter dated Tuesday to the leadership of the Senate Banking Committee.

The AFL-CIO represents millions of American workers whose pensions and 401(k)s could soon hold cryptocurrencies if the legislation passes.

The 182-page Senate bill, released last month, would allow FDIC-insured banks to directly hold and trade cryptocurrencies.

This would also codify blockchain“phantom stocks” based on stocks that trade independently of traditional securities markets, the union warned.

“This not only places banks at greater risk of losses and failures, but it also places the FDIC’s taxpayer-backed deposit insurance fund at greater risk,” Calemine wrote in the letter.

He drew comparisons to the unregulated derivatives trading that fueled the 2008 financial collapse, warning that the bill creates conditions for a crisis.

The federation also raised concerns about provisions that would give retirement plans such as 401(k)s and pensions the green light to hold cryptocurrencies.

“Rather than protecting workers from the instability of crypto asset values, the Responsible Financial Innovation Act would increase worker exposure,” the letter states.

These provisions “significantly weaken both federal and state enforcement tools” designed to protect pension funds from fraud, the AFL-CIO says.

Calemine presented the legislation as allowing issuers to “escape SEC regulation through tokenization” and warned that this would lead to the proliferation of assets that investors would wrongly perceive as safe.

The dispute comes as the Senate prepares for a possible November vote on the Responsible Financial Innovation Act, introduced by Sen. Cynthia Lummis (R-Wyo.) alongside Democratic Sen. Kirsten Gillibrand of New York.

“We want this to be on the president’s desk before the end of the year,” Lummis said. CNBC last month.

At least seven Democratic senators would have to join all Republicans to reach the 60-vote threshold for passage, although a Sept. 9 framework backed by 12 Democratic senators signaled emerging bipartisan momentum despite opposition from the AFL-CIO.

Crypto Industry Rejects Union Concerns

Kadan Stadelmann, Chief Technology Officer at Komodo Platform, said Decrypt the AFL-CIO is fighting against inevitable change.

“The AFL-CIO will soon discover that its defense of the status quo will prove costly as Bitcoin continues to siphon money from traditional investment products, starting with the types of low-yielding products held by retirement funds,” he said.

He predicted that within two decades, 401(k)s and pensions will inevitably hold up. Bitcoinarguing that its volatility is steadily declining, a trend that he says “will only strengthen in the years to come.”

The “real facade” is the AFL-CIO’s claim to defend workers while keeping them tied to fiat currencies that erode the value of their time through inflation, Stadelmann added, calling it “an anachronistic institution in the age of Bitcoin.”

Nitesh Mishra, Co-Founder of ChaiDEX, said Decrypt“the law does not significantly modernize oversight” and “instead codifies a distinct and lightly regulated parallel market, weakening consumer protections and the authority of the SEC.”

Asked what safeguards would be essential if banks were allowed to keep cryptocurrencies under FDIC insurance to avoid contagion like that of 2008, Mishra called for “a robust liquidity on-ramp, transparency across the system, and better protection from regulators.”