According to the Howey test, Philippines SEC rules crypto mining contracts are securities and that the firms that plan to sell these contracts will need to apply to be licensed.
12 April, AtoZForex – According to the latest ruling from the Securities and Exchange Commission in the Philippines (SEC), cryptocurrency mining contracts will not be considered as securities in the country. It is also official that firms that plan to sell these contracts will need to apply to be licensed.
Philippines SEC Rules Crypto Mining Contracts are Securities
The Philippines SEC has declared that cryptocurrency mining contracts qualify as securities under the Howey test. The advisory from the 10th April states the following:
“Based on an initial investigation conducted by the Department, entities and persons offering cloud mining contracts 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 advisory also explains that, as per this guidance, these contracts should be “duly registered” before they are offered for sale. The entities selling them should obtain “the appropriate license and/or permit to sell securities to the public.”
While purchasing cloud mining contracts, an entity purchases the rights to some part of the tokens mined via the use of mining equipment that is held by a different person. As soon as the contract is issued, some of the cloud mining contracts can be bought and sold.
This is working somewhat differently from the way mining pools work, where members lend the pool hashrate from mining equipment that they hold. They do so in exchange for a share of the tokens that the pool gets as block rewards.
SEC advises dealing only with registered entities
As per the advisory from SEC, cloud mining contracts would be classified as securities under the Howey test since they involve an “investment of money.” That investment is made in a “common enterprise,” and investors expect profits in return for buying these contracts. The document also notes that those profits “are generated from the efforts of” the “cloud mining company.”
The SEC also warns that firms selling these contracts might “be prosecuted and held criminally liable.” The advisory recommends that the public does not invest in unregistered cloud mining contracts.
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