This week the Philippines Securities and Exchange Commission (SEC) revealed to the public that it plans to enforce securities regulations against cloud mining operations. According to the SEC’s statement, the regulatory agency believes these types of contracts should be defined as “securities.”
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Philippines Securities and Exchange Commission Issues Warning Against Cloud Mining Operations and Contracts
The Philippines financial regulator has issued a warning to cloud mining operations promoting this business model without registering with the SEC. Cloud mining operations involve a contract of pre-purchased hashpower from a remote mining operation, and users buy the contracts for a lifetime or a limited amount of time. Cloud mining users then reap the benefits of the pool’s mining revenue if the operation is profitable and if it is not contracts can break even or suffer from losses. The SEC explains that an initial investigation has shown numerous local and foreign cloud mining companies are soliciting these contracts to citizens residing in the Philippines.
Cloud Mining Operators and Agents Can Face Up to 21 Years in Prison
According to the regulator these contracts promise to pay the investor daily or weekly mining proceeds and these unregistered firms also affiliate commissions for every recruit that registers. Due to this business practice, the SEC states that Under Rule 26.3.5 par. 4 of the 2015 Securities Regulation Code these sales are defined as investment contracts. Using the Howey Test the SEC explains the results confirm that these investments are securities.
“Since this scheme involves the sale of securities to the public, the SRC requires that the said securities offered are duly registered and that the appropriate license and/or permit to sell securities to the public
