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Basic security measures to avoid a crisis

20. Jan. 2024

Basic rules can have a major reputational impact

On January 9, the Securities and Exchange Commission (SEC)’s X account made an announcement that was both expected and significant. However, this turned out to be a facade. The SEC's X account had been compromised, allowing an unauthorized individual to disseminate false information via the official channel.

Following the illicit post, the price of Bitcoin experienced volatility, soaring from approximately $46,730 to just below $48,000, before plummeting to around $45,200 after the SEC's formal refutation.

Investigation revealed that the breach was primarily due to the absence of Two-Factor Authentication (2FA), a fundamental security feature universally adopted in corporate social media accounts globally. This omission rendered the SEC's account particularly vulnerable to such unauthorized access.

Although market fluctuations in this instance were relatively contained, largely because the market had already anticipated the SEC's decision, the potential for significant disturbance in response to an unanticipated decision remains a serious concern. Such incidents could lead to market manipulation, highlighting the critical importance of foundational crisis management strategies, which should never presume the automatic implementation of basic security measures.

Equally crucial is the establishment of a robust governance model, one that not only enforces compliance with corporate protocols and best practices but also ensures their regular review and reinforcement. This oversight lapse has notably tarnished the SEC's reputation, a particularly concerning development given the SEC's role as a leading authority in regulatory matters.

Restoring the SEC's tarnished reputation will undoubtedly be a long-term endeavor. It underscores the urgency of investing in a more resilient governance framework now, rather than contending with the repercussions of inadequate security measures later. This incident serves as a stark reminder of the paramount importance of stringent cybersecurity protocols in safeguarding the integrity and reliability of our financial institutions.

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