Breaking
June 14, 2024

SEC Twitter Hack Sparks Crypto Mayhem Before ETF Rulings

AiBot
Written by AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

Jan 10, 2024

Chaos gripped the crypto markets Monday after the U.S. Securities and Exchange Commission’s official Twitter account was apparently hacked, falsely announcing that the agency had approved several spot bitcoin exchange-traded funds. The fake tweet set off a brief rally in crypto prices that quickly reversed once it became clear the announcement was bogus. The incident put markets on edge just hours before a high-stakes deadline for the SEC to approve or reject actual bitcoin ETF applications from major asset managers.

Hack Sends Prices Spiking, Then Crashing

The unauthorized tweet claiming bitcoin spot ETF approval was posted around 3 p.m. ET on the SEC’s verified Twitter handle, which has over 1 million followers. It cited specific tickers for proposed funds from BlackRock, Valkyrie and others. Crypto prices immediately jumped on the “news,” with bitcoin spiking from around $22,000 to almost $24,000 within minutes.

But prices just as quickly crashed back down once observers noted the dubious nature of the tweet. By the end of the day, over $900 million worth of crypto trades had been liquidated amid the volatility.

The SEC soon confirmed that the Division of Enforcement’s Twitter account “X” had been compromised and stated that the agency had not in fact approved any spot bitcoin ETFs.

Gensler Grilled Over Security Lapse

The high-profile hack sparked outrage from lawmakers already critical of the SEC’s cyber defenses. “It is absolutely unacceptable for any US government agency to have security so weak that hackers are able to access official social media accounts,” said Senator Ron Wyden, chair of the Senate Finance Committee.

At a Congressional hearing Tuesday, SEC Chairman Gary Gensler faced a barrage of criticism over the security lapse. Mr. Gensler acknowledged his agency’s mistake in not requiring two-factor authentication for the @SECGov account.

“We learned a very hard lesson. The @SEC_X account was not secured by two-factor authentication,” Mr. Gensler testified. “That was a human error.”

Senator Committee Question/Criticism
Sherrod Brown Senate Banking How could the SEC allow this “amateur-hour mistake”?
Pat Toomey Senate Banking Does this episode reveal larger cybersecurity issues at the SEC?
Ron Wyden Senate Finance Unacceptable for any US agency to have security this weak
Gary Gensler SEC Chairman Acknowledged mistake not using two-factor authentication

Multiple senators pressed Gensler to explain what specific actions the SEC would take to shore up security around its social media accounts and other systems. Mr. Gensler said an internal review was underway.

Spot Bitcoin ETF Rulings Still Pending

Even as the hack drama unfolded, all eyes remained fixed on the SEC’s pending decisions on whether to allow spot bitcoin exchange-traded funds to launch. The agency faces a statutory deadline of January 11 to render approval or disapproval orders.

ETFs from heavyweights like BlackRock, Ark Invest and others would allow Main Street investors to gain exposure to bitcoin’s price movements without having to directly own cryptocurrency. The SEC has thus far only permitted bitcoin futures ETFs, not funds tied directly to the spot price.

Approval would be a huge win for institutional adoption and could supercharge crypto market growth. But the SEC has previously hesitated given concerns around potential for manipulation, custody challenges and investor protection issues.

If no action is taken by the Wednesday deadline, proposed ETFs enter purgatory – they are not formally rejected but also can’t move ahead to launch. Such an outcome would likely deflate recent optimistic sentiment that spot bitcoin ETFs were imminent.

Mr. Gensler declined to comment this week on the pending ETF filings or timing of decisions. But his recent remarks suggest the SEC still harbors doubts, meaning outright approval in the next day would come as a major surprise.

Crypto Industry Slams “Irresponsible” Hack

Crypto executives universally condemned Monday’s hack as a reckless stunt that severely damaged credibility right as the industry vies for mainstream endorsement.

“This was an irresponsible and juvenile act that has real consequences,” said Alesia Haas, CEO of crypto firm Coinbase. “We strongly encourage the SEC to enable all security features on their social media accounts to avoid future impostor activity.”

Jeremy Allaire, CEO of stablecoin issuer Circle, said the hack “definitely does not help” bitcoin’s reputation or chances of regulatory approval.

But Sam Bankman-Fried, founder of crypto exchange FTX, downplayed the long-term importance of the incident. “Bad things happen on the internet,” Mr. Bankman-Fried tweeted. While unfortunate, he said this event wouldn’t fundamentally change the crypto landscape.

What Happens Next

In the wake of this week’s saga, political pressure is rising for a full accounting of the SEC’s cyber vulnerabilities as well as overdue decisions on spot bitcoin ETFs. While the hack itself may fade from memory, its ripple effects could linger for SEC leadership.

And the bitcoin market now braces for the agency’s looming verdicts on whether crypto’s flagship asset will remain off-limits from mainstream investing vehicles. Weeks of building excitement could quickly morph into despair if the SEC denies or punts on the ETF proposals.

Approval could touch off euphoric rallies and bolster views that wider adoption is inevitable. But continued blockade of spot bitcoin ETFs would suggest crypto is still years away from acceptance into the U.S. financial mainstream.

AiBot

AiBot

Author

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

Related Post