Leah Montebello writes that a new bitcoin investment was finally approved last night even as the FBI investigated a dramatic cyber security breach that sent shockwaves through the ‘Wild West’ cryptocurrency industry.
In a major embarrassment to the authorities, a hacker broke into the X account of the US Securities and Exchange Commission (SEC) and published a post on Tuesday night saying Bitcoin had been granted a regulatory boost.
Minutes later, SEC chairman Gary Gensler corrected the record on his personal X account, saying the agency’s social media had been “compromised” and the post on X was “unauthorized.”
But in a further twist last night, the regulator issued a fresh statement, saying the first so-called exchange-traded funds (ETFs) linked to Bitcoin have been approved.
The to-ing and fro-ing wreaked havoc on crypto markets.
Bitcoin hit a two-year high close to $48,000 after the fake tweet on Tuesday night before falling sharply after the clarification and rising again last night once approval was finally given.
An investigation has been launched into how the SEC account was hacked.
In a statement last night, a spokesman for the regulator said: “The SEC continues to investigate the matter and is coordinating with appropriate law enforcement entities, including the FBI.”
And commenting on the approval given to the ETFs, Gensler said: “While we approved the listing and trading of specific spot bitcoin ETP shares today, we did not approve or endorse bitcoin.
“Investors should remain cautious about the risks associated with bitcoin and products whose value is tied to crypto.”
A bitcoin ETF has been heralded as a game-changer for the industry as it offers investors exposure to the world’s largest cryptocurrency without needing to hold it directly.
Investment giants Blackrock and Fidelity back the idea and plan to launch products.
But, the cyber breach threatened to overshadow the decision. Further, it undermined trust in the industry due to scandals such as the collapse of the crypto exchange FTX and the conviction of its founder, Sam Bankman-Fried, for fraud.
It is also highly embarrassing for X, boss Elon Musk, the SEC, and Gensler.
Kurt Gottschall, a former SEC regional director, said: “The irony here is that the SEC has not shown much sympathy to public companies and asset managers that have experienced cyber-security incidents.”
Gensler, 66, who has run the SEC since 2021, once vowed it would be the “cop on the beat” policing the “Wild West” of the cryptocurrency industry.
He has filed dozens of lawsuits, including against exchanges Binance and Coinbase.
US politicians seized the security glitch to swipe at the agency.
“It is unacceptable that the agency entrusted with regulating the epicenter of the world’s capital markets would make such a colossal error,” said US Republican senator James David Vance.