Republicans in Congress are seeking to extend a recent winning streak on cryptocurrency legislation, but Democrats are raising sharp concerns over their latest proposal — the Responsible Financial Innovation Act of 2025 (RFIA).
Originally introduced in 2023 by Senators Cynthia Lummis and Kirsten Gillibrand, the bill was reintroduced in July as a draft discussion by a group of Senate Republicans. It builds on the recently passed CLARITY Act, which set a regulatory framework for digital assets.
While Republican lawmakers have championed RFIA as a step toward economic growth and clearer rules for the crypto industry, Democrats see it as potentially destabilizing and rife with regulatory loopholes.
In a fact sheet released by the Senate Committee on Banking, Housing, and Urban Affairs’ Democratic staff, concerns ranged from investor protection to risks for the broader financial system.
In a letter from Democrats on the committee, lawmakers warned the bill could compromise Americans’ retirement savings by reducing the Securities and Exchange Commission’s authority over digital assets and shifting oversight to the “chronically under-resourced” Commodity Futures Trading Commission (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 stated.
Democrats argue the legislation’s introduction of an “ancillary asset” category would allow companies to sell crypto without the protections afforded under securities law. This could enable sellers to “self-certify” offerings, bypassing SEC scrutiny designed to safeguard 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,” the letter added.
Lawmakers also cautioned that allowing FDIC-insured banks to engage more heavily in crypto could heighten the risk of a “financial meltdown,” endangering the Deposit Insurance Fund and the stability of the banking system.
Senator Elizabeth Warren, the committee’s ranking member, has previously outlined principles she believes are essential for a robust and protective crypto regulatory framework.
Defending the bill, Senator Lummis told Business Insider: “Ancillary assets draw the clearest legal line between securities and commodities and provide consumers with the disclosures they need to make informed decisions.”
The clash underscores the widening partisan divide over how the U.S. should regulate the fast-evolving cryptocurrency market — with Republicans focused on fostering innovation and Democrats prioritizing systemic stability and investor protection.
