Feature photo from Sheila Omban
- Looking at the technicalities of cloud mining, it seems like this could be one of the ways to earn passive income, but is it allowed here in the country? Bitcoiners and webcast guests Ramon Tayag and Atty. Rafael Padilla explained when it is illegal and when it is not.
- According to Padilla, there is no issue with mining bitcoin. But entering into cloud mining contracts has an issue, specifically for those who offer this kind of contract without a permit from the SEC.
- As early as 2018, the SEC released a public advisory to warn Filipinos about investing in cloud mining contracts, adding that cloud mining contacts require appropriate registration from the Commission.
One of the topics discussed during the 18th edition of BitPinas Webcast, a weekly #CryptoPH show, was about cloud mining, a way of mining cryptocurrencies without having to own mining equipment.
Essentially, Bitcoin enthusiasts can buy computing power from third-party providers who are responsible for running the equipment.
Looking at the technicalities of cloud mining, it seems like this could be one of the ways to earn passive income, but is it allowed here in the country? Bitcoin enthusiasts and webcast guests, Ramon Tayag and Atty. Rafael Padilla, explained the circumstances under which it is illegal and when it is not.
Cloud Mining: Legal or Illegal?
According to Padilla, there is no issue with mining bitcoin. There is also no issue with joining Mining Tools, which is a group of mining operators, as a contributor.
However, there is an issue with entering into cloud mining contracts, specifically for those who offer these types of contracts without a permit from the Securities and Exchange Commission (SEC).
“Ang issue iyong mga tinatawag nacloud mining contracts, lalo na yung mga mining activities na pinopromote as investment products. So, kapag nakakita ka na sinasabi sayong magbigay ka ng pera, hindi computing power, para ipangbili ng machines equipment na gagamitin para makapag-mine ng crypto, tapos bibigyan ka namin ng profit share,” warned Padilla.
As per the Fintech-focused Lawyer, since cloud mining contracts are considered investment contracts in the form of security, they are required under the law to be registered with the Commission, even if they are used for cryptocurrencies.
“So, madaling-madali lang malaman kung legitimate ba iyong ganyang mga cloud mining contracts—kung registered ba yan sa SEC. At kung hindi, alam nating illegal. At pag tinanong natin kung registered ba yung cloud mining nila sa SEC, hindi sapat na rehistrado yung company nila, dapat mayroon iyang permit to sell—nireregister mismo yung security,” he added.
Meanwhile, Tayag compared cloud mining scams to Ponzi Scheme rug-pull projects, stating that once these schemes accumulate a large network and hold significant assets, they will vanish immediately, taking the money with them:
“Actually, kaya I stayed away from cloud mining, is because it is an easy way to scam. Like, if you pay for a credit card, then they will pay you to keep you there, but one day if they have enough subscribers, they stop.”
SEC vs Cloud Mining Contracts
On the other hand, Padilla also mentioned that, as early as 2018, the SEC has already released a public advisory to warn Filipinos about investing in cloud mining contracts.
In the advisory, the Commission has laid out the four most common characteristics of cloud mining contracts in the country:
- They require registration of an online account on a website or a mobile platform.
- They require the payment of an initial fee or investment, either in fiat currency or cryptocurrency. to avail of their offered mining contracts.
- They promise to pay the investor daily or weekly mining proceeds, usually equivalent to a percentage of the initial fee or investment, directly to the latter’s cryptocurrency wallet or fund account.
- They offer affiliate commissions for every recruit that registers and invests using thereferrals from the investor’s link.
“Applying the Howey Test as discussed by the Honorable Supreme Court in Power Homes Unlimited vs. SEC (G.R. No. 164182, February 26, 2008), a cloud mining contract is an investment contract falling within the purview of the term “securities” as defined by law. First, there is an investment of money. Second, there is an investment in a common enterprise. Third, there is an expectation of profits. Lastly, the profits are generated from the efforts of others,” the regulatory agency explained.
Technically, joining in cloud mining activities is not illegal in the country, but these activities should secure registration and proper permits from the SEC, pursuant to the provisions of Section 8 of the Securities Regulation Code (SRC).
“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 Commission expanded.
Just earlier this year, the regulatory agency flagged down BitPrime, an entity that brands itself as a cryptocurrency service in the form of cloud mining, or a coin trust-mining company, where they allegedly generate income through cloud-mining investments. The SEC released an advisory about the said entity after they found out that BitPrime has not secured prior registration and/or license to solicit investments.
Kung maalala niyo noong 2017 at 2018, while the rest of the world is in ICO mania, actually here in the Philippines, its actually cloud mining mania. Pero wala naman silang registration kay SEC, tapos binebenta pa nila via multi-media marketing. So, obviously scam iyon kasi hindi registered. So iwasan natin na mag-join ng ganoong mga cloud mining contracts, kasi those are not legitimate, they are not registered with the SEC and wala kayong protection from those promoters,” Padilla concluded.
This article is published on BitPinas: Is Bitcoin Cloud Mining Legal or Illegal in the Philippines?
Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.