- BankProv will no longer offer loans secured by cryptocurrency mining platforms after writing off loans worth $47.9 million.
- Mining rigs with secured loans have been forced to sell equipment during several cryptocurrency incidents in the past two years.
Crypto-friendly BankProv has announced that it will no longer offer loans secured by cryptocurrency mining platforms. Prior to this announcement, the bank had written off $47.9 million in loans secured by it through 2022.
BankProv has roughly halved the proportion of its digital asset portfolio that is made up of debt collateralized by rigs since the quarter ended Sept. 30, 2022, according to the latest filing with the US Securities and Exchange Commission (SEC).
As of December 30, 2022, the bank had $41.2 million in loans related to digital assets, including $26.7 million in loans secured by crypto platforms, which will continue to decline because the bank no longer holds these types of loans.
Selling mining hardware during crypto winter
During the 2021 bull market, the cryptocurrency industry has taken on huge amounts of debt, often offering mining rigs as collateral for low interest rates.
But the subsequent bear market, which started in 2022, created difficult conditions for miners, and many were forced to sell their bitcoins. [BTC] Mining rigs to cover operating costs, which leads to lower prices of mining hardware.
Despite the price drop, some of the banks that issued bonds against mining rigs were forced to repossess some of the miners that were used as collateral.
In addition, a previous SEC filing stated that BankProv repossessed the mining rigs for $27.4 million in loan forgiveness on September 30, 2022, resulting in an $11.3 million writedown for the company.
The losses likely played a significant role in the company’s decision to stop servicing these types of loans. Carol Holley, Chief Financial Officer of Provident Bancorp Holdings, said:
“As we contemplate 2022, we are keen to build on the lessons learned and create a better and stronger bank. Despite our losses in 2022, we enter 2023 well capitalized and well diversified.”