The Philippines securities watchdog warned that it will regulate cryptocurrency cloud mining contracts in the country under existing securities rules.

In a statement issued Tuesday, the country’s Securities and Exchange Commission (SEC) said that cloud mining contracts should be classified as securities, since, when the Howey test is applied, the process was determined to involve a money investment with the expectation of a return of profits.

Cloud mining is a process where investors do not deploy actual mining hardware to earn cryptocurrency, but instead take a stake the mining capacity of a remote facility through a contract, which can sometimes be further exchanged.

According to the Philippines SEC, the decision arose after it observed individuals and firms advertising and soliciting investors inside the country, which the agency is now treating as an unregistered issuance of securities.

As such, the regulator stated that any entity or individuals – including salesmen, brokers, promotors or recruiters – involved with offering cloud mining contracts in the country without registration may be prosecuted and penalized with a sentence of up to 21 years in prison.

The ruling follows the Philippines’ toughened stance on activities relating to cryptocurrencies in recent months.

While the securities regulator has been reportedly crafting laws to regulate initial coin offerings, it has also stepped its up efforts to scrutinize cryptocurrency projects that fall under the scope of existing securities rules.

Separately, the country’s lawmakers are also weighing in on proposals for tougher penalties on any crime that relates to cryptocurrency, according to a CoinDesk report in March.

Cryptocurrency miner image via Shutterstock