In a surprising turn of events, the highly anticipated decision by the US Securities and Exchange Commission (SEC) on whether to approve a spot-Bitcoin exchange-traded fund (ETF) quickly transformed into a major cybersecurity incident. The SEC X Account, a social media account belonging to Wall Street’s main regulator, was hacked, leading to a false post claiming that the agency had given the green light to Bitcoin ETF plans. This fake announcement caused a brief surge in the price of the world’s largest cryptocurrency and triggered an investigation by US authorities into the breach.
The breach of the SEC X Account has raised eyebrows among crypto enthusiasts, who have long seen the commission’s chair, Gary Gensler, as an opponent due to his efforts to regulate the industry. The irony of a cybersecurity incident occurring at a regulator that has repeatedly warned about the vulnerabilities of cryptocurrencies online has not gone unnoticed. Traders have been speculating for weeks that the SEC could potentially approve multiple Bitcoin ETFs as early as Wednesday.
The SEC quickly issued statements asserting that it would collaborate with law enforcement to investigate the incident. They confirmed that the unauthorized access had been terminated and clarified that the post claiming ETF approval was not made by the SEC or its staff. Furthermore, Gensler made it clear that no decision had been reached regarding ETFs.
According to the SEC, the @SECGov X Account experienced unapproved activity by an unknown party for a brief period on Tuesday afternoon. The false post was subsequently removed, and the head of business operations at X, Joe Benarroch, stated that the account was secure and an investigation into the root cause was underway.
SEC X Faces Security Breach as Compromised Phone Number Allows Unauthorized Access; Two-Factor Authentication Absent During Incident
It was revealed that the SEC’s account was compromised through the acquisition of control over an associated phone number. At the time of the incident, two-factor authentication, which adds an extra layer of security, was not enabled. The SEC has yet to comment on X’s initial assessment.
Republican Senators JD Vance and Thom Tillis have sent a letter to the SEC demanding an explanation for the “errant” post. They are seeking a briefing and answers to their questions by January 23.
Approximately a dozen companies have applied to list Bitcoin-backed ETFs in the US. The SEC has until January 10 to take action on at least one of those applications. Crypto insiders have speculated that the regulator may use this deadline to announce multiple decisions simultaneously.
The SEC’s past reluctance to allow a spot-backed Bitcoin ETF launch has revolved around concerns about investor protection and potential market manipulation. However, since losing a legal battle against crypto asset manager Grayscale Investments, speculation has mounted that the SEC may have to give in to the growing demand for such products.
Social media has been abuzz with hype and anticipation surrounding the approval of a Bitcoin ETF. In October, the false claim that BlackRock had been approved to list a spot ETF on X led to a 10% surge in Bitcoin’s price. Approximately $85 million worth of mostly bearish trading positions were liquidated during the subsequent reversal.
It remains to be seen how this cybersecurity incident will impact the SEC’s decision-making process regarding Bitcoin ETFs and how regulators will address the ongoing challenges posed by cyberattacks.