Union Shield: Protecting Pensions from Crypto Risk

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                                <p>Anas is a crypto native journalist and SEO writer with over five years of writing experience covering blockchain, crypto, DeFi, and emerging tech.</p>
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        <p>Last updated:&nbsp;</p>
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            <time datetime="2025-10-08T11:23:17+00:00">October 8, 2025</time>
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<p>The AFL-CIO, a major labor federation, has voiced its strong opposition to the Responsible Financial Innovation Act, specifically addressing the Senate Banking Committee. The group argues this legislation could jeopardize the retirement savings of working Americans by exposing them to the unpredictable nature of cryptocurrency markets. Additionally, they claim the bill elevates the potential for wider financial instability.</p>

<p>In a formal communication dated October 7 and addressed to Chairman Scott and Ranking Member Warren, Jody Calemine, the AFL-CIO's Director of Government Affairs, articulated that the proposed law paves the way for retirement investment vehicles such as 401(k)s and pension funds to incorporate crypto assets, rather than shielding individuals from market turbulence. <a href="https://aflcio.org/about/advocacy/legislative-alerts/letter-raising-concerns-about-would-enable-crypto-industry-avoid" target="_blank">The letter</a> details the organization's concerns.</p>

<p>This coalition speaks for millions of workers across the nation, whose long-term financial security could be significantly impacted by the passage of this act.</p>

<p>This stance comes after <a href="https://cryptonews.com/news/trump-signs-order-crypto-401k-risk/">President Trump's August executive order</a>, which opened the door for the inclusion of alternative assets, including digital currencies, within the substantial $12.5 trillion pool of 401(k) investments.</p>

<p>Data indicates that over 90 million U.S. citizens actively participate in employer-sponsored defined-contribution retirement plans. As of March 31, 2025, the total value of U.S. retirement assets was estimated at $43.4 trillion.</p>

<p>Earlier, on September 22, House Financial Services Committee Chairman French Hill and Subcommittee Chairman Ann Wagner <a href="https://cryptonews.com/news/sec-chair-urges-fast-track-crypto-market-structure-bill-as-white-house-sets-deadline/">called upon</a> SEC Chair Paul Atkins to expedite the implementation of President Trump's directive. Their recommendation involved recognizing professionals certified by FINRA as accredited investors, facilitating broader access to these alternative investments.</p>

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<h2 class="wp-block-heading"><span id="h-union-warns-bill-creates-shadow-markets-and-exposes-fdic-to-risk">Union Warns: Legislation Could Foster Unregulated Markets and Endanger FDIC Funds</span></h2>
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<p>The AFL-CIO has identified what they consider to be two primary dangers stemming from the proposed legislation.</p>

<p>Firstly, the bill might broaden the scope for banks insured by the FDIC, along with their holding companies, to directly engage in the possession and trading of cryptocurrencies, moving beyond merely acting on behalf of their clientele.</p>

<p>The organization asserts this could make banks more vulnerable to potential losses and failures, simultaneously placing the FDIC's Deposit Insurance Fund, which is backed by taxpayer money, at increased risk.</p>

<p>Secondly, the bill gives legal standing to the tokenization of both securities and other assets. This provision would empower private entities to essentially create unofficial versions of public stocks, operating outside the regulatory purview of the SEC.</p>

<p>Calemine cautioned that these "shadow stocks," based on blockchain technology and purportedly linked to traditional public stocks but trading independently, would generate new hazards. These risks would affect both those holding the shadow stocks and those who invested in public stocks without choosing to participate in these unregulated markets.</p>

<p>The union conveyed its serious concerns regarding the possible effects on the overall stability of established financial markets and institutions. It drew parallels to the largely unregulated <a href="https://www.bis.org/publ/otc_hy0905.pdf" target="_blank">derivatives markets</a> that played a significant role in the financial crisis of 2008.</p>

<figure class="wp-block-image size-large"><img decoding="async" width="1024" height="482" src="https://cimg.co/wp-content/uploads/2025/10/08095007/image-187-2-1024x482.png" alt="Largest US Union Federation Opposes Crypto Bill, Says It Exposes Workers' Retirement Funds to Risk" class="wp-image-434891"  /><figcaption class="wp-element-caption">Source: <a href="https://www.bis.org/publ/otc_hy0905.pdf" target="_blank">BIS</a></figcaption></figure>

<p>According to the AFL-CIO, the proposed law significantly diminishes the ability of both federal and state authorities to combat fraud and manage conflicts of interest.</p>

<p>The bill, they argue, provides mechanisms for those issuing securities to sidestep SEC oversight through tokenization. It also reduces requirements for public disclosure and overrides existing state laws designed to prevent fraud, regulate securities, and protect consumers.</p>

<p>Calemine stated that while most pension funds currently avoid cryptocurrency investments due to perceived risks, the bill provides a "<strong><em>facade of regulation</em></strong>" that might make crypto assets appear more appealing and widespread within investment portfolios. This could lead to investors mistakenly believing these assets are safe.</p>

<h2 class="wp-block-heading"><span id="h-industry-pushes-forward-as-regulators-signal-friendlier-stance">Industry Seeks Progress as Regulators Hint at More Open Approach</span></h2>
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<p>The <a href="https://cryptonews.com/news/us-senators-cynthia-lummis-kirsten-gillibrand-propose-legislation-regulate-digital-assets/">Responsible Financial Innovation Act</a>, initially presented in July by Senate Banking Chair Tim Scott and Senators Cynthia Lummis, Bill Hagerty, and Bernie Moreno, seeks to explicitly recognize that digital assets classified as "ancillary assets" are not automatically securities.</p>

<p>This legislation is designed to clarify the respective jurisdictions of the SEC and the CFTC. It suggests that most digital assets should be treated as commodities under CFTC regulation, while the SEC would continue to oversee investment contracts and ensure investor protection.</p>

<p>A <a href="https://cryptonews.com/news/us-crypto-bill-draft-seeks-clarity-on-sec-cftc-roles-defi-rules/">revised draft from September 7</a> included protections for DeFi developers and nascent blockchain sectors like DePINs. It proposed the establishment of a Joint Advisory Committee on Digital Assets, composed of members from both the SEC and CFTC.</p>

<p>The revised draft suggested that developers contributing to decentralized protocols, validators, liquidity providers, and wallet creators would not automatically be subject to traditional financial regulations if the protocols they support lack central control.</p>

<p>Airdrops, staking rewards, and outputs from liquid staking are defined as "gratuitous distributions" rather than securities offerings.</p>

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<p>Last month, SEC Chair Paul Atkins <a href="https://cryptonews.com/news/sec-to-issue-warning-notices-before-crypto-crackdowns-says-chair-atkins/">announced</a> that the agency would move away from "<a href="https://cryptonews.com/news/sec-to-issue-warning-notices-before-crypto-crackdowns-says-chair-atkins/">regulation by enforcement</a>," and instead provide firms with <a href="https://cryptonews.com/news/crypto-firms-will-receive-notice-ahead-of-enforcement-actions-sec-chair-paul-atkins-pledges/">preliminary notices</a> of technical infractions. They would then have up to six months to rectify these issues before enforcement actions are considered.</p>

<p>Since assuming his role in April, Atkins has dismissed several high-profile cases inherited from Gary Gensler’s tenure and initiated a <a href="https://cryptonews.com/news/sec-crypto-task-force-announces-new-key-crypto-roundtable/">Crypto Task Force</a>.</p>

<p>He has also expressed reservations about broadly classifying cryptocurrencies as securities and shown interest in tokenized stocks and bonds that closely resemble existing financial instruments.</p>

<p>Shortly before, on September 8, CFTC Acting Chair Caroline D. Pham <a href="https://cryptonews.com/news/cftc-may-approve-foreign-crypto-exchanges-under-u-s-rules-what-it-means-for-traders/">outlined a potential framework</a> allowing overseas crypto exchanges to function under U.S. regulations. This could significantly broaden market access for American traders.</p>

<p>Pham noted that many American crypto companies had moved their operations to other countries due to a lack of regulatory clarity in the U.S., with jurisdictions in Europe, Asia, and the Middle East actively developing digital asset frameworks that have attracted businesses.</p>


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