The Securities and Exchange Commission (SEC) has released an advisory regarding Cloud Mining Contracts in the Philippines.
In a statement, the Commission has determined that Cloud Mining Contracts are investment contracts. It satisfies the condition of a contract where the person invests his money in a scheme with the expectation of profits from the efforts of a collective group of people who also invested.
As an investment contract, a cloud mining contract is, therefore, a form of securities, as defined by Philippine laws. As securities, any cloud mining contracts offered must first be registered with the government and that the scheme must have a license to issue such contracts.
Anyone who recruits people into cloud mining contracts may be held criminally liable in accordance with Philippine laws. The commission hereby advises the public to stop investing into unregistered cloud mining contracts and take necessary due diligence when dealing with cloud mining companies.
Since bitcoin is hard to mine compared to the past years, cloud mining has surged in popularity. A cloud mining company will have access to a large pool of hardware capable of mining large volume bitcoins and/or other cryptocurrencies. It allows users to rent their hardware so that a percentage of what is mined will be given to users who sign up for a cloud mining contract for a monthly fee. It eliminates the need for the user to build his own bitcoin mining hardware, which is expensive. Since the cryptocurrency’s value is going up, the user is led to believe that the initial investment will grow. More often than not, the token’s volatility is not explicitly stated and therefore, the investor is led to believe the coin’s value will always go up.
Usually, the user is required to register an account online and then pay the initial fee for the mining contract. Payouts may be daily or weekly depending on the contract. There are also commissions offered for users who refer other users.
The SEC also urges everyone to inform the commission about the persons and entities who still engage in these kinds of operations.
The Securities and Exchange Commission has been working with the Bangko Sentral ng Pilipinas (BSP) to regulate cryptocurrency transactions in the country. While the BSP released guidelines for virtual currency exchanges, the SEC earlier released an advisory on initial coin offerings.