Crypto-friendly banks have terminated loans backed by cryptocurrency mining rigs

Crypto-friendly banks have terminated loans backed by cryptocurrency mining rigs

The holding company for the crypto-friendly bank, BankProv, has revealed it is no longer providing loans secured by cryptocurrency mining rigs after writing off $47.9 million in loans primarily secured by them throughout 2022.

According to a January 31 filing with the United States Securities and Exchange Commission (SEC), BankProv has nearly halved the proportion of its digital asset portfolio consisting of rig-collateralized debt since September 30, 2022.

The bank held $41.2 million in digital asset-related loans as of December 30 last year, including $26.7 million in loans collateralized by crypto mining rigs, which “will continue to diminish as the bank is no longer originating this type of credit.”

During the 2021 bull market, the crypto mining sector has taken on massive amounts of debt, frequently offering up mining machines as security to cut interest rates.

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The succeeding bear market, which began in 2022, made life difficult for miners, and many were compelled to sell their bitcoin (BTC. Tickers are down $22,993 dollars.) They sold mining rigs to cover running costs, causing mining hardware prices to drop.

Despite declining prices, certain banks that had issued mining rig-collateralized debt were obliged to reclaim some of the miners that had been used as collateral.

According to a prior SEC filing, on September 30, 2022, BankProv confiscated mining rigs in exchange for the forgiveness of $27.4 million in loans, resulting in an $11.3 million write-off for the company.

The losses were most certainly a factor in its decision to discontinue making these types of loans, according to Carol Houle, the chief financial officer of its holding company, Provident Bancorp:

“As we look ahead to 2022, we are excited to learn from its mistakes and emerge as a better, stronger bank.” “Despite our losses in 2022, we are well-funded and diverse as we enter 2023.”

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