MANILA - The Securities and Exchange Commission warned the public against a new cryptocurrency investment scheme called "cloud mining contracts."
Cloud mining uses remote data centers to perform the complex calculations needed to produce or "mine" cryptocurrencies such as bitcoin and ethereum.
In a statement dated April 10, the SEC said numerous local and foreign companies were enticing people to take part in this investment scheme with promises of daily or weekly returns in mining proceeds as well as commissions for new recruits.
To take part in the scheme, investors must first register online and pay an initial fee or investment either in legal tender or cryptocurrency, the SEC said.
The SEC said this constitutes an investment contract and should therefore be registered with the regulator.
Any cloud mining contract not registered with the SEC is therefore illegal and is punishable by fines or imprisonment, the SEC added.
The SEC also warned that criminal charges may be filed against people who invite or recruit others to join or invest in cloud mining contracts or who act as salesmen, brokers, dealers or agents of these companies.
The SEC has issued multiple warnings against investing in cryptocurrencies, the most prominent of which was the KROPS initial coin offering (ICO) of Joseph Calata, owner of the delisted agribusiness Calata Corporation. The Calata ICO was also shut down by regulators in Hong Kong.
There have also been multiple social media groups and other such scams, including one cash trading and PBB150 Trading, that have been specifically named by the SEC as unregistered entities selling securities related to cryptocurrencies.
The BSP has already allowed the use of cryptocurrencies, but only for use in remittance activities. To date it only has two registered coin exchanges engaged in remittance, Coins.ph and Rebit.ph.
Both the SEC and BSP say they are not opposed to fintech innovations such as bitcoin, but they want to ensure the public fully understands such innovations before they get involved.