Crypto-friendly bank ends loans backed by mining rigs: Details inside
- BankProv will no longer provide loans secured by cryptocurrency mining rigs after writing off $47.9 million in loans.
- Mining rigs that secured loans have been forced to sell equipment during the several crypto crashes within the past two years.
Crypto-friendly bank BankProv has announced that it will no longer provide loans secured by cryptocurrency mining rigs. Prior to this announcement, the bank wrote off $47.9 million in loans secured by them through 2022.
BankProv has nearly halved the proportion of its digital asset portfolio composed of rig-collateralized debt since the quarter ending September 30, 2022, as per the recent filing with the United States Securities and Exchange Commission (SEC).
As of December 30 2022, the bank held $41.2 million in digital asset-related loans, including $26.7 million in loans collateralized by crypto mining rigs, which will continue to decline as the bank no longer originates this type of loan.
Mining hardware sold during crypto winter
During the 2021 bull market, the crypto mining industry has taken on massive amounts of debt, frequently offering mining rigs as collateral to lower interest rates.
However, the subsequent bear market, which began in 2022, created hard conditions for miners, and many were forced to sell their Bitcoin [BTC] mining rigs in order to cover operating costs, causing mining hardware prices to plummet.
Despite the drop in prices, some banks that had issued mining rig-collateralized debt were forced to repossess some miners that were used as collateral.
Moreover, a previous SEC filing mentioneds that BankProv repossessed mining rigs in exchange for $27.4 million in loan forgiveness on September 30, 2022, resulting in a $11.3 million write-off for the company.
The losses most likely played a significant role in the company’s decision to stop conforming these types of loans. Carol Houle, the CFO of its holding company Provident Bancorp, said,
“As we reflect on 2022, we are eager to take its lessons and emerge a better, stronger bank. Despite our 2022 losses, we enter 2023 well capitalized and well diversified.”