Security authorities of Philippines have stated that current cryptocurrency cloud mining contracts will have to obey the existing securities rules, coindesk.com reported.
The Securities and Exchange Commission (SEC), clarified in a statement released on Tuesday that cloud mining contracts are classified as securities. According to the Howey Test, cloud mining contracts is a process that involves money investment with an expectation of yielding profits.
In cloud mining, investors do not use their own hardware to mine cryptocurrencies but use a remote mining facility through a contract. It allows investors to create cryptocurrencies without managing the hardware and the possibility to further exchange contracts.
The Philippines SEC defended their decision by informing that a lot of individuals and firms are advertising and attracting investors within the country. The activity should be treated as an unregistered issuance of securities.
The security authority further said that any individual or entity that does not comply with the new guidelines would be sentenced up to 21 years in prison. The involved parties include brokers, salesmen, recruiters or promoters linked to a cloud mining contract.
The Philippines have adopted a stricter stance regarding cryptocurrencies and related activities.
The SEC stated, “The [Securities Regulation Code] requires that the said securities offered are duly registered and that the appropriate license and permit to sell securities to the public are issued to the corporation and/or its agents.”
Not only has the security regulator been developing laws to regulate initial coin offerings but it also has increased its efforts to supervise cryptocurrencies projects that fall under the current security laws.
Coindesk reported in March that the nation is considering proposals for harder fines on any crime that can be linked to cryptocurrencies.
As per news in cointelegraph.com, SEC Philippines announced that it is planning to classify ICOs under the Securities Regulation Code. In 2017, Bangko Sentral ng Pilipinas (BSP) acknowledged bitcoin as a legal payment method and initiated considering applications from the crypto exchanges from the country.
It is not the first time a country has launched regulations against cloud crypto mining. News published in bitcoin.com stated that the Attorney General of South Carolina testified cloud crypto mining as securities.
He said, “Genesis Mining offers mining contracts for six cryptocurrencies: Bitcoin, Dash, Ethereum, Litecoin, Monero, and Zcash, each of which entitles an investor to…a “Mining Contract”… in exchange for investing in a Mining Contract, Respondent Genesis Mining engages in a certain amount of computational effort on behalf of the investors.”
Cloud crypto mining is becoming popular as most of the investors do not have the system requirements need to mine digital currencies. It requires specific hardware and a huge electricity supply that is generally not available. Many states in the US have banned crypto mining due to the toll it puts on the electricity system. It is easy for miners to use remote hardware to apply their mental prowess required in mining cryptocurrencies. As of now the security authority of Philippines has not seen any resistance, but miners can stand against its decision if their business gets victimized.