Philippines Regulator Issues Warning to Cloud Mining Participants
Originally published on: Bitcoin News
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April 12, 2018
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.”
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 are issued to the corporation and/or its agents, pursuant to the provisions of Section 8 of the SRC,” the Philippines SEC emphasizes.
The warning further states, “Likewise, those who act as salesmen, brokers, dealers or agents of these companies in selling or convincing people to invest in the investment scheme being offered by these cryptocurrency mining companies including solicitations and recruitment through the internet without the necessary license or authority from the Commission may likewise be prosecuted.”
[Offenders] will be held criminally liable under Section 28 of the Securities Regulation Code and penalized with a maximum penalty of twenty-one (21) years of imprisonment or both pursuant to Section 73 of the SRC.
The Philippines Regulator Says the General Public Should Stop Investing in These Investment Activities
The regulator implies operations that invite and recruit this type of activity without registration will be penalized in accordance with the Supreme Court decision mandated in 2014. Further, the SEC warns the public to “stop investing” in cloud mining contracts with a statement that highlights it’s warning in capitalized and bold lettering:
In view thereof, the public is hereby advised to STOP INVESTING in these kinds of unregistered investment activity and to take the necessary precautions in dealing with these cloud mining companies.
The Philippines government is not the only group of regulators looking to stop cloud mining operations due to securities laws. Last month news.Bitcoin.com reported on how the Attorney General of South Carolina served a cease and desist order to Genesis Mining. The state of South Carolina has also deemed mining contracts to be securities, and plans to prosecute unregistered entities as well.
What do you think about the Philippines regulator’s warning against cloud mining operations and contracts? Let us know what you think about this subject in the comments below.
Images via Shutterstock, Pixabay, and the Philippines SEC.
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