Yesterday, Old Mutual, one of the largest insurance policy underwriters in all of Africa, announced that it would stop offering coverage on high-tech crypto mining equipment. The decision, which was shared with the public on Monday, June 10, 2019, came largely because the larger African world of cryptocurrency was not regulated well enough, opening the door to an unmanageable wealth of risk.
ITWeb initially reported on Old Mutual's decision, after which many reports quickly followed.
Although not as important as the lack of regulation across Africa's cryptocurrency market, Old Mutual also cited two other reasons as having molded the company's decision:
Mining equipment is sometimes structurally modified to the point that it is several times more prone to overheating, among a handful of other mess-ups that aren't supposed to happen. The greater cryptocurrency market, especially in regions that are less regulated than others, is home to tons of fraud and similar illegal, predatory activity.
According to statistics derived from a survey taken last year labeled formally by the company as a Savings and Investment Monitor survey, more than half of all South Africans polled didn't understand the concepts behind how cryptocurrencies work. Further, more than two-fifths of people who responded to the survey felt that they were bad news, just like a pyramid scheme is.
Pyramid schemes are inherently bad because they pay off earlier investors with more recent investors' money, claiming that the misappropriated money was actually returns from the operation of a business that's purported to exist, though, in actuality, it's not real.
Experts believe that part of the South African company's decision was bolstered by a paper that was released some five months ago, in Jan. 2019, by the South African Reserve Bank, which did not positively view the potential of cryptocurrencies in the country.