AFL-CIO’s Opposition to Cryptocurrency Regulation
The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), representing the largest coalition of labor unions in the United States, has voiced strong objections to a proposed Senate bill aimed at regulating the cryptocurrency industry. In a letter addressed to the Senate Banking Committee, the AFL-CIO raised alarms over the absence of adequate worker protections and insufficient oversight from the Responsible Financial Innovation Act (RFIA).
Concerns Over Worker Protections
AFL-CIO director Jody Calemine articulated concerns regarding how the legislation could jeopardize both workers and the broader financial framework of the American economy. He warned that the bill’s approach to cryptocurrency could create vulnerabilities for retirement savings and the general financial stability of the country.
“This measure would allow the crypto sector to function in a more expansive manner within our financial landscape, without necessary precautions or effective regulation,”
Calemine stated.
Legislative Background
Introduced by Senators Cynthia Lummis and Kirsten Gillibrand in 2022 and later modified, the RFIA aims to offer an alternative regulatory strategy compared to the recently passed CLARITY Act in the House, focusing instead on various aspects of cryptocurrency oversight.
Critique of the RFIA
Calemine emphasized that the AFL-CIO backs initiatives to modernize regulatory frameworks that aim to shield workers from the unpredictable nature of cryptocurrencies. However, he criticized the RFIA for providing only a superficial layer of regulation, asserting that it risks increasing workers’ exposure to market fluctuations by allowing retirement funds like 401(k)s to invest in such volatile assets.
Potential Risks to Financial Stability
Additionally, Calemine warned that the legislation could expose the taxpayer-supported Deposit Insurance Fund—designed to safeguard consumer bank deposits—to heightened risks by permitting banks to handle crypto transactions. He indicated that this could lead to a development where private enterprises might establish a ‘shadow public stock’ system that evades oversight from the Securities and Exchange Commission.
Historical Parallels and Conclusion
Drawing parallels to the 2008 financial crisis, the AFL-CIO cautioned that the legislation’s provisions might provoke similarly perilous financial practices. Calemine noted,
“Permitting banks to engage in crypto trading activities can introduce risks that mirror those that led to the financial calamities over a decade ago.”
In closing, the AFL-CIO has urged for resistance against the RFIA, which remains a draft proposal that has yet to be formally advanced in the Senate.
