SEC Forced to Clarify Bitcoin ETF Rules After 'Unauthorised' X Post

The U.S. Securities and Exchange Commission's X account was 'compromised' when it falsely announced the approval of spot Bitcoin ETFs.

Dow Jones 10 January, 2024 | 8:18AM
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The US Securities and Exchange Commission (SEC) has been forced to reiterate and clarify its position on Bitcoin exchange-traded funds (ETFs) after its X (formerly Twitter) account was "compromised" by a post inaccurately claiming the launch of ETFs tied to the Bitcoin spot price had been approved.

SEC Chair Gary Gensler said Tuesday the regulator's account on X had been compromised and the purported news was not true.

The agency has not approved any spot bitcoin ETFs, and the earlier post, now deleted, was sent by an unauthorised user, Gensler said.

"The SEC has not approved the listing and trading of spot bitcoin exchange-traded products," Gensler said on X.

"The unauthorised tweet regarding bitcoin ETFs was not made by the SEC or its staff," a spokesperson at the SEC confirmed to MarketWatch via email.

The SEC found "there was unauthorised access to and activity on" the agency's X account by "an unknown party," an agency spokesperson said, adding that the "unauthorised access has been terminated" and that the SEC will work with law enforcement to investigate the matter.

Bitcoin's price (BTCUSD) briefly shot more than 2% higher Tuesday afternoon after the unauthorised post went out, before falling back. The cryptocurrency is down 2.4% over the past 24 hours to around $45,840 (£36,007), according to CoinDesk data.

Cryptocurrencies accounted for some of the best-performing ETFs across 2023, as Morningstar analysis shows.

Crypto-market participants have widely anticipated the SEC to approve a spot bitcoin ETF soon. The agency has until January 10 to make a decision on the bitcoin ETF application, which had been filed by ARK Investment Management and 21Shares.

Today, both BlackRock and Ark Investment Management announced fee cuts for their Bitcoin ETF proposals. BlackRock lowered the fee on its iShares ETF by five basis points to 0.25%, while Ark’s ETF with 21Shares will be listed with a fee of 0.21%, according to Bloomberg.

The agency first approved a bitcoin futures ETF in late 2021 but has not approved any ETFs investing directly in the cryptocurrency, arguing that bitcoin spot markets could not be sufficiently monitored to prevent fraud and manipulation.

Last August, a federal judge ruled the SEC's reasons for denying an application by Grayscale Investments to list a bitcoin spot ETF were "arbitrary and capricious" and in violation of federal administrative law.

The judge argued the SEC's decision to approve two bitcoin futures funds but to deny a bitcoin spot fund was a breach of the principle in the law that agencies "must treat like cases alike" because prices in the bitcoin futures market closely tracked those in the spot market.

Commenting, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the incident had brought the "pump and dump" nature of crypto scams into sharp relief.

"Fans have been holding out for regulatory approval of spot Bitcoin exchange traded funds, and fraudsters have clearly used this desire for legitimacy to again cheat the system," she said.

"Investors should be wary of trying to catch a ride on crypto solely on these moments of momentum, particularly given the highly volatile journey that crypto has been on.

"The events of the past 24 hours also should serve as a warning that fraudsters operating pump and dump schemes are numerous in the crypto wild west and speculators can get their fingers badly burned.

"Globally it’s still far from clear what the regulatory landscape will look like and anyone considering speculating in crypto should still proceed with caution, use money they can afford to lose, and only dabble at the fringes of their well-diversified portfolios."

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