Philippines’ Securities and Exchange Commission (SEC) has announced that cloud mining contracts fall under the definition of “securities.”

In its investigations, the SEC found that certain entities are luring the public to invest in cloud mining contracts. These entities advertise, promote, and define cloud mining as “a process of acquiring cryptocurrency through the utilization of shared mining equipment located in an off-site or a remote datacenter, with the purchase of equipment being funded by investors who avail of cloud mining contracts,” the SEC noted.

“Applying the Howey Test as discussed by the Honorable Supreme Court…a cloud mining contract is an investment contract falling within the purview of the term “securities” as defined by law,” the SEC clarified.

The Securities Regulation Code (SRC) requires that the said securities offered are duly registered and appropriate license and/or permit to sell securities to the public are issued to the corporation and/or its agents. Accordingly, the SEC said:

“[T]hose 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 and 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.”

“Accordingly, those who invite or recruit other people to join or invest in this venture or offer investment contracts or securities to the public may be held criminally liable or accordingly sanctioned or penalized…”