We all know that banks make it difficult for blockchain businesses by denying them access to conventional banking services and accounts. Well now, it seems insurance firms are throwing a spanner in the works for cryptocurrency mining businesses in Africa.
Old Mutual Insure, a pan-African insurance firm, is opting out of insuring the computer equipment used by cryptocurrency mining firms, a local news outlet reports. The insurance firm has taken the decision to refuse insurance, citing the unregulated nature of the industry, and that cryptocurrency is often associated with cybercrime as the main reasons.
What’s more, as cryptocurrency mining farms operate around the clock, every day of the week, hardware is prone to overheating and other malfunctions. For insurers, cryptocurrency mining facilities are some of the most high-risk clients.
Old Mutual Insure is now telling its branches not to insure any businesses that partake in cryptocurrency mining.
“We have chosen not to provide cover for this type of risk as it is quite tricky to conduct a proper risk analysis of an unregulated fledgling industry that is already on the radar of financial authorities due to the unfortunate association with money laundering and cybercrime,” Old Mutual’s Insurance Expert Christelle Colman said in the report.
“Even doing a comprehensive inventory of the insured equipment is difficult because the value of the highly modified computer equipment is typically inflated and almost impossible to verify as it is usually imported from obscure suppliers in the Far East,” they added.
It makes sense that cryptocurrency mining firms would want to insure their hardware, given that their profit is directly related to their hash rate, which in turn is dictated by the amount of miners they have running. If hardware malfunctions, profitability goes down.
Usually it’s banks that make life difficult for cryptocurrency businesses, though.
Typically, blockchain businesses are subject to strict banking conditions due to the unregulated nature of the industry. In one case, it even led regulators in Switzerland to issue guidelines to help establish good working relationships between blockchain startups and banks.
Published June 13, 2019 — 10:41 UTC