Cloud Mining is the process of leasing computing resources to mine cryptocurrencies.
But because these contracts are advertise as a way to make a profit, states like South Carolina considers these contract as securities, and you need to be a licensed broker-dealer to sell these contracts.
This doesn’t mean cryptocurrencies are considered as securities by the SEC of South Carolina, just the mining contracts. So Coinbase and other exchanges are safe in this regard.
My thoughts: While I believe Genesis Mining and Hashflare are legitimately mining cryptocurrencies (and not ponzi scamming people by paying out people with money from new contracts they sold), they control your money.
Unlike a bank which have FDIC insurance (at least in United States), or even stocks/bonds, which entitle the holder to recoup some of their investments (even if it is pennies on the dollar like what happened to Bear Stearns and Lehman Brothers during the financial crisis), these mining contracts does not guarantee anything if there are any issues with these companies.
In addition, you can’t do anything if these companies decide to restrict withdrawals to specific minimums or increase maintenance cost if there are any attached to the contract, you are under the total control of these companies for the duration of these contracts. You also can’t sell these contracts back to these companies if you want to stop mining for any reason.
That’s why I will no longer promote or talk about any cloud mining companies going forward. I will also remove all referral links to cloud mining companies as I believe we should all be responsible for our own investments at all times.
Links:
South Carolina Cease & Desist Order: http://2hsvz0l74ah31vgcm16peuy12tz.wpengine.netdna-cdn.com/wp-content/uploads/2018/03/01621904.pdf
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