Philippines SEC Warns Cryptocurrency Cloud Mining Contracts Must Be Registered As Securities

Ali Raza
  • The Philippines' Securities and Exchange Commission (SEC) recently warned the public cryptocurrency cloud mining contracts are securities
  • This as investors buy them expecting profits in the long-run. Those who offer such contracts will need to register with the regulator.

The Philippines’ Securities and Exchange Commission (SEC) has warned that cryptocurrency cloud mining contracts will be viewed and regulated as securities. Using the 71-year-old Howey test, the SEC decided that such contracts need to be registered before being offered.

Cryptocurrency cloud mining operations sell users contracts that allow them to keep the earnings a specific amount of hashrate will bring in, over a specific amount of time. The user pays for the contract up front, and never really operates mining machines.

Per the SEC, investors put their money in cloud mining contracts expecting profits, based on the returns they’ll get from the amount of hashrate they purchase. The scheme differs from joining mining pools, as users don’t directly purchase contracts from cryptocurrency mining pools, they use their own hashrate.

Investing in cryptocurrency could mining contracts is, as such, considered an investment in a “common enterprise,” in which investors expect profits “generated from the efforts of others.” The Philippines’ SEC will require all brokers, dealers, salesmen and recruiters to get an appropriate license to sell these contracts. Those who continue operating cloud mining businesses without a license will face a sentence of up to 21 years in prison.

Furthermore, according to the regulator, the public should stop any and all investments into unregistered contracts. The regulator’s warning reads:

“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.”

Philippines' SEC

The SEC’s move, which highlight’s the Philippines’ toughened stance on cryptocurrency-related activities, came after it noticed firms were advertising and soliciting investors within the country’s borders.

Cannabis Shops Turn to Crypto Apps Amidst Coronavirus Cash Shortages

Michael LaVere
  • Cannabis shops in Boulder, Colorado are using bitcoin payment app Strike to conduct "contactless" exchanges.
  • Cash shortages and lack of sanitation are causing businesses to find alternative means for transaction. 

Cannabis shops are using bitcoin payment services to conduct business in place of fiat amidst the coronavirus pandemic. 

According to a report by CoinDesk, cannabis dispensaries in Boulder, Colorado have been onboarded to the closed beta for Strike, a bitcoin payment service application founded by lighting network supporter Zap. 

Zap, founded by Jack Mallers, has been operating a closed beta for the payment application Strike which allows users the option of sending bitcoin or dollars and receiving funds in their bank account. The application uses a simple QR code interface, similar to Venmo, that allows users to send funds without having prior knowledge or expertise with bitcoin. 

Mallers said, 

Every Strike user is given a public domain at strike.me. We’re using Lightning for really fast online settlement of value transfers. … It’s also beneficial for privacy on the sender’s side.

Johnny Kurish, general manager at Boulder’s Helping Hands Herbals cannabis shop, said the application allowed his dispensary to process $1,000 worth of purchases since being added to the beta last week. 

Kurish said the dispensary will switch to only accepting Strike payments, which allow for contactless exchanges in light of the coronavirus pandemic. 

He said, 

We’re really lucky to have curbside drop-offs. We check the ID through the roll-up window, deliver the cannabis to a podium in front of the car. We’re happy to reopen with an option that’s safe for our staff.

Featured Image Credit: Photo via Pixabay.com