The Securities and Exchange Commission of the Philippines has declared that cryptocurrency cloud mining contracts qualify as securities under the Howey test.
An April 10 advisory on the matter explains that, in light of this guidance, such contracts must be "duly registered" before they are offered for sale, and entities selling them must obtain "the appropriate license and/or permit to sell securities to the public."
In purchasing a cloud mining contract, an entity buys the rights to some portion of the tokens mined through the use of mining equipment that is owned by a different person or group. Once issued, some cloud mining contracts can be bought and sold.
This scheme works differently than that of mining pools, in which members lend the pool hashrate from mining equipment that they actually own in exchange for a share of the tokens that the pool receives as block rewards.
According to the document, cloud mining contracts would be deemed securities under the Howey test because they involve an "investment of money," that investment is made in a "common enterprise," investors expect profits in return for purchasing the contracts, and those profits "are generated from the efforts of" the "cloud mining company."
The advisory warns that entities selling these contracts may "be prosecuted and held criminally liable," and recommends that the public stop investing in unregistered cloud mining contracts.
In a January cease-and-desist order issued against several entities with overlapping personnel, the SEC related that, in some cases, an ICO is "essentially the same as a public offering of securities."
In March, Philippine Senator Leila M. de Lima submitted a bill that would make penalties for crimes more stringent when those transgressions involve "cryptocurrencies, notably bitcoins."