Nearly seven years ago, the Securities and Exchange Commission (SEC) denied the first spot bitcoin exchange-traded fund (ETF) application, citing the risk presented to investors by market manipulation. It would become a familiar refrain for the countless rejections that followed.
The regulator's got some explaining to do.
Tuesday's bogus tweet from the SEC's official X (formerly Twitter) account caused a rapid pump and then plummet in bitcoin's price as traders tried to make sense of the apparent approval. By the looks of it, the powerful regulator had just greenlit every prospective BTC ETF application, delivering bitcoin speculators their long-awaited victory a full day ahead of schedule.
Of course, the suspicious post – it was paired with a $BTC cashtag – was a hoax. Within minutes Chair Gary Gensler tweeted from his own account that SEC had not approved anything. Bitcoin markets continued their sell-off in response.
The whole charade prompted calls for an investigation by crypto-friendly lawmakers and enraged social media users alike into how the SEC allowed itself to become a disinformation platform.
"Fraudulent announcements, like the one that was made on the SEC’s social media, can manipulate markets. We need transparency on what happened," tweeted Senator Cynthia Lummis (R-Wy.) after the SEC confirmed its account has been "compromised."
It was an ironic twist in what many expected were the final hours of the SEC's stonewalling of the spot bitcoin ETF.
The SEC's own statements primed traders for overreacting to this type of misinformation. In mid-October the regulator tweeted "Careful what you read on the internet. The best source of information about the SEC is the SEC," in response to a retracted CoinTelegraph tweet that stated that BlackRock's bitcoin ETF application had been approved.
While the first part of that tweet retained its credibility Tuesday, the second half was reduced to farce. As many commentators pointed out, even the SEC cannot be trusted for what's going on at the SEC.
Last week, an SEC spokesperson told CoinDesk that any decisions would first be posted on its own internal EDGAR database. Of course, the general public and even informed observers cast such guidance aside on Tuesday.
"Does this mean we can blame more of the @secgov’s horrible rulemaking and so-called regulation by enforcement on a 'compromised account'?, tweeted Rep. Bill Huizenga in response to Gensler.
Beyond the gleeful irony of it all, the SEC's apparently hacked account raised uncomfortable questions about how seriously the regulator took its mandate to protect itself in order to protect investors (though it's unclear how exactly the X account was compromised).
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"The SEC will work with law enforcement and our partners across government to investigate the matter and determine appropriate next steps relating to both the unauthorized access and any related misconduct," the regulator said hours into the episode.
