By Allyson Versprille
A long-awaited resolution from the U. S. Securities and Exchange CommissionThe U. S. government to approve a Bitcoin spot exchange-traded fund has temporarily become a major cybersecurity incident that is being investigated by the FBI.
The SEC’s X account was compromised and a fake message claiming the company had plans to greenlight the products fueled a brief surge in the value of the world’s largest cryptocurrency on Tuesday. The SEC, Wall Street’s most sensible regulator, said Wednesday that the Federal Bureau of Investigation is investigating the incident.
“It shows the scale and frequency of cyberattacks,” said Kurt Gottschall, a spouse of the Haynes Boone law firm and a former regional director of the SEC. “The irony here is that the SEC hasn’t shown much sympathy toward public corporations and asset managers who have faced cybersecurity incidents. “
The breach gave bread to crypto devotees who have long viewed commission chairman Gary Gensler as an enemy due to his eagerness to control the industry. The irony of a cybersecurity incident involving a regulator warning about online vulnerabilities in cryptocurrencies has not escaped critics who have spent years waiting for the SEC to approve a Bitcoin ETF. Traders have been speculating for weeks that the company could approve various products as soon as Wednesday.
In statements late Tuesday, the regulator said it would work with authorities to investigate the incident, that the unauthorized activity had ended and that the message had not been released through the SEC or its staff. In a separate statement, Gensler clarified that no decisions had been made on ETFs.
After the fake message was removed, Joe Benarroch, X’s head of business operations, said in a statement that “the account is secure and we are investigating the root cause. “
Read more: X Investigating the cause of the compromised SEC account
The social media service said in a post that “an unidentified individual” compromised the SEC’s account by acquiring control of an associated phone number. It added that the account didn’t have two-factor authentication enabled at the time of the incident. Such authentication adds an extra layer of security that’s become increasingly common as cyberattacks proliferate.
The SEC did not immediately respond to an email sent outside of general business hours seeking comment on X’s initial assessment.
Meanwhile, Republican Sens. J. D. Vance and Thom Tillis demanded in a letter a “errant” message from the SEC. They are asking for an SEC briefing and answers to questions no later than Jan. 23.
About a dozen companies have implemented the list of Bitcoin-backed ETFs in the United States. The SEC has until Jan. 10 to take action on at least one of those apps, and crypto experts have speculated that the regulator will use that date to announce a series of decisions at once.
There are two technical needs that will need to be met before a spot-backed Bitcoin ETF can start trading. First, the SEC will have to approve so-called 19b-4 filings made through exchanges that would include ETFs. The regulator will have to approve the applicable S-1 forms, which are the programs for registering potential issuers, a list that includes BlackRock Inc. and Fidelity.
The SEC is planning to vote on the exchanges’ filings, the 19b-4s, this week, Bloomberg News has reported. The regulator may or may not take action on the issuers’ applications, the S-1s, around the same time. If the SEC grants both sets of required approvals, the ETFs could start trading as soon as the next business day.
Read More: Why Crypto Is Counting on Spot Bitcoin ETFs: QuickTake
The SEC under Gensler and his Trump-era predecessor, Jay Clayton, has in the past refused to authorize the launch of such a product, raising considerations about investor hedging and the possibility of market manipulation. However, since August, when the SEC lost a key legal war against crypto asset manager Grayscale Investments, the hypothesis has been growing that the regulator will have to settle for the growing clamor over the product.
The uproar around an endorsement spread on social media. Bitcoin surged as much as 10% on Oct. 16 when a crypto news site erroneously posted on X that BlackRock had been allowed to list a spot ETF. About $85 million of the industry’s most commonly bearish positions were liquidated the increase, which was temporarily reversed.
(Updates with SEC’s Wednesday statement on FBI probe.)
–With Hannah Miller, Olga Kharif, Suvashree Ghosh and Edwin Chan.
To contact the reporter on this story:Allyson Versprille in Washington at [email protected]
To contact the editors of this story: Michael P. Regan at mregan12@bloomberg. net
Ben Bain, Stephanie Stoughton
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