The Philippines SEC appears to be preparing for a crackdown on cloud-based cryptocurrency mining, warning the public not to invest in these schemes.
2 hrs ago
A bulletin sent out by the Securities and Exchange Commission of the Philippines warns the public against investing in illegal cloud mining contracts..
“The Commission has detected that certain individuals or groups of persons are enticing the public, through a popular social media platform or in their own independent websites, to invest in so-called cloud mining contracts,” the commission wrote.
According to the SEC, this is a security, reasoning that these contracts are essentially an investment in “a common enterprise” by pooling resources to mine cryptocurrencies and paying out returns to those who participate.
“There is expectation of profits because the investor is given the promise of a return in the form of fiat currency or cryptocurrency. Lastly, the profits are generated from the efforts of others because the cloud mining company undertakes to perform all the profit-generating activities and distributes all the profits to all investors after deducting mining costs,” the bulletin added.
While it is difficult to wrap one’s mind around the idea of mining being tantamount to securities investments, the way that cloud mining works sometimes behaves in that manner.
There is, as far as we know, no legal precedent in any other country where this particular practice would be regulated as a security, but the Philippine SEC is using legal precedent—namely, the case of Power Homes Unlimited vs. SEC, 2008—to justify this classification.
“...The [Securities Regulation Code] 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…,” the SEC wrote.
The commission clarified that those who don’t abide by this particular law (Section 8, SRC) will face up to 21 years of prison.
Even people who invite others to join a cloud mining operation could be prosecuted as accomplices.
Despite the hard-line attitude of the SEC towards cloud mining contracts, the Philippines is apparently a very friendly place for other cryptocurrency activities due to its lax regulations in the space.
Currently, there are 29 companies that submitted applications to operate as cryptocurrency exchanges in the country.
If it continues this relaxed policy, the Philippines might become another safe haven for exchanges moving from China and India, which recently have passed harsh measures against them.