A growing rift has emerged between the cryptocurrency industry and unions in Washington, DC, as lawmakers debate whether to calm down rules allowing cryptocurrencies in 401(k) retirement accounts.
At the center of the dispute is proposed market structure laws that may allow retirement accounts to be exposed to crypto, a move that unions say could expose employees to speculative risk. In a letter sent to the U.S. Senate Banking Committee on Wednesday, the American Federation of Teachers argued that cryptocurrencies are too volatile for pension and retirement savings and warned that employees could suffer significant losses.
The letter sparked immediate resistance from crypto investors and industry representatives. “The American Federation of Teachers has by some means developed probably the most logically incoherent and uninformed position that one can possibly write on the subject of regulating the crypto market structure,” said one crypto investor on X.
The AFT letter to Congress opposes regulatory changes that may allow 401(k) retirement accounts to carry alternative assets, including cryptocurrency. Source: CNBC
In response to the letter, Castle Island Ventures partner Sean Judge said the bill would improve oversight and reduce systemic risk while allowing pension funds access to an asset class that has delivered strong long-term returns.
Consensys attorney Bill Hughes said the AFT's opposition to the crypto market structure bill was politically motivated and accused the group of acting as an extension of Democratic lawmakers.
Funds held in U.S. retirement accounts by account plan type. Source: ICI
Resistance to crypto in pension and pension funds is increasing
Proponents of allowing crypto into retirement portfolios, nonetheless, argue that it can democratize finance, while unions have strongly opposed relaxing current regulations, claiming that crypto is simply too dangerous for traditional retirement plans.
“Unregulated, dangerous currencies and investments are usually not where we ought to be investing pensions and retirement savings. The wild, wild West is just not what we’d like, whether crypto, AI or social media,” AFT President Randi Weingarten said Thursday.
The AFT represents 1.8 million teachers and education professionals within the United States and is one among the most important teachers unions within the country.
According to Better Markets, a nonprofit and nonpartisan advocacy group, cryptocurrencies are too volatile for traditional retirement portfolios and their high volatility can create time horizon mismatches for retirement investors looking for a predictable, low-volatility retirement plan.
Volatility of Bitcoin and Ether in comparison with other asset classes and stock indices. Source: US Federal Reserve
In October, the American Federation of Labor and the Congress of Industrial Organizations (AFL-CIO) also wrote to Congress opposing provisions within the crypto market structure regulatory bill.
The AFL-CIO, the most important union federation within the US, wrote that cryptocurrencies are volatile and pose a systemic risk to pension funds and the economic system as an entire.
