BankProv announced suspension of loans secured by mining equipment

02/01/2023

1 minute read

2023.02.01 04:18

By Tiffany Smith

Budrigannews.com – After writing off $47.9 million in loans primarily secured by cryptocurrency mining rigs throughout 2022, the holding company for the crypto-friendly bank, BankProv, has disclosed that it will no longer be providing loans secured by these devices.

BankProv filed with the Securities and Exchange Commission (SEC) on January 31 that since the quarter ending September 30, 2022, the proportion of its digital asset portfolio made up of rig-collateralized debt has already been reduced by nearly half.

As of December 30 of last year, the bank held $41.2 million in digital asset-related loans, with $26.7 million of those loans secured by crypto mining rigs. These loans “will continue to decline as the Bank is no longer originating this type of loan,” the bank stated.

During the 2021 bull market, the cryptocurrency mining industry took on a significant amount of debt and frequently offered their own mining rigs as collateral to lower their interest rates.

However, miners were forced to sell their Bitcoin (BTC) mining rigs in order to cover operating expenses during the subsequent bear market that began in 2022, causing mining hardware prices to plummet.

Even though prices were dropping, some banks that had given out debt with mining rigs as collateral had to take back some of the miners.

On September 30, 2022, BankProv repossessed mining rigs in exchange for the forgiveness of $27.4 million in loans, resulting in a write-off of $11.3 million for the company, as stated in a previous SEC filing.

According to Carol Houle, the CFO of its holding company Provident Bancorp, the losses probably played a significant role in the company’s decision to cease issuing loans of this kind.

“As we consider 2022, we are eager to learn from its experiences and emerge a stronger and better bank. We enter 2023 well capitalized and diversified, despite our losses in 2022.