Cloud Mining Contracts Are Securities, Says Philippines SEC

The Philippines securities watchdog has warned that it will regulate cryptocurrency cloud mining contracts under existing securities rules.

AccessTimeIconApr 11, 2018 at 11:00 a.m. UTC
Updated Sep 13, 2021 at 7:48 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The Philippines securities watchdog warned that it will regulate cryptocurrency cloud mining contracts in the country under existing securities rules.

In a statement issued Tuesday, the country's Securities and Exchange Commission (SEC) said that cloud mining contracts should be classified as securities, since, when the Howey test is applied, the process was determined to involve a money investment with the expectation of a return of profits.

Cloud mining is a process where investors do not deploy actual mining hardware to earn cryptocurrency, but instead take a stake the mining capacity of a remote facility through a contract, which can sometimes be further exchanged.

According to the Philippines SEC, the decision arose after it observed individuals and firms advertising and soliciting investors inside the country, which the agency is now treating as an unregistered issuance of securities.

As such, the regulator stated that any entity or individuals – including salesmen, brokers, promotors or recruiters – involved with offering cloud mining contracts in the country without registration may be prosecuted and penalized with a sentence of up to 21 years in prison.

The ruling follows the Philippines' toughened stance on activities relating to cryptocurrencies in recent months.

While the securities regulator has been reportedly crafting laws to regulate initial coin offerings, it has also stepped its up efforts to scrutinize cryptocurrency projects that fall under the scope of existing securities rules.

Separately, the country's lawmakers are also weighing in on proposals for tougher penalties on any crime that relates to cryptocurrency, according to a CoinDesk report in March.

Cryptocurrency miner image via Shutterstock

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.