Republicans in Congress are trying to extend a winning streak of crypto legislation that kicked off last month, but Democrats are ringing more alarm bells over the latest proposed bill.
In July, a group of Senate Republicans introduced a draft discussion of the Responsible Financial Innovation Act of 2025 (RFIA). It was originally introduced in 2023 by Senators Cynthia Lummis and Kirsten Gillibrand.
The bill seeks to build on the recently passed CLARITY Act, which establishes a regulatory framework for digital assets. However, the Senate Committee on Banking, Housing and Urban Affairs’ democratic staff recently released a fact sheet on the bill, laying out key concerns.
In stark contrast to Republican lawmakers who have touted the economic benefits of crypto, Democrats see it as potentially destabilizing and riddled with potential conflicts.
In a letter from Democrats on the Senate Banking Committee, lawmakers flagged risks to Americans’ retirement savings, which they say are created by compromising the Securities and Exchange Commission’s authority to regulate the sector, instead, assigning responsibility to the “chronically under-resourced CFTC.”
“Most concerningly, the bill provides a superhighway for traditional assets to escape the SEC’s authority simply by converting stocks and other non-crypto securities into tokens.”
The letter says that the proposed legislation would use the concept of an “ancillary asset,” allowing companies to sell crypto to investors without the protections under securities law. Sellers could “self-certify,” avoiding the SEC oversight meant to protect investors.
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“Even for Americans who invest in non-crypto companies, this would mean exposing their retirement accounts and investments to greater volatility while stripping away existing federal and state enforcement tools to protect and help investors who get scammed.”
They also argue that the bill raises the risk of a “financial meltdown” as FDIC-insured institutions engage with crypto and are exposed to its risks.
“The bill would bring crypto activities firmly within the taxpayer safety net, threatening the Deposit Insurance Fund, the safety and soundness of the banking system, and the ongoing availability of the critical non-crypto banking services that businesses and households rely on.”
Sen. Elizabeth Warren, the committee’s ranking member, previously outlined the principles she believes are necessary to establish a crypto market framework that effectively regulates the market.
Sen. Lummis defended the proposed bill. In a statement to Business Insider, she said:
“Ancillary assets draw the clearest legal line between securities and commodities and provide consumers with the disclosures they need to make informed decisions.”
