BankProv, the cryptocurrency-friendly bank’s holding company, has revealed that it will no longer grant loans secured by cryptocurrency mining rigs, because it canceled USD 47.9 million in loans guaranteed mainly by them throughout 2022.
According to a January 31 filing with the United States Securities and Exchange Commission (SEC), BankProv has already nearly halved the proportion of its digital asset portfolio consisting of platform-collateralized debt since the quarter ending September 30, 2022.
The bank had $41.2 million in loans related to digital assets as of December 30 last year, consisting of $26.7 million in loans collateralized by cryptocurrency mining rigs. that “will continue to decline as the Bank no longer originates these types of loans.”
The cryptocurrency mining industry went heavily into debt during the 2021 bull market, often offering mining rigs they own as collateral to lower their interest rates.
Nevertheless, the subsequent bear market that began in 2022 resulted in difficult conditions for miners, with many being forced to sell the bitcoin (BTC) mining equipment they owned to cover operating costs, causing mining hardware prices to soar. they will collapse
Despite falling prices, some banks that had issued debt collateralized with mining rigs were forced to repossess some of the miners used as collateral.
According to an earlier filing with the SEC, BankProv recovered mining rigs in exchange for forgiveness of USD 27.4 million in loans on September 30, 2022, resulting in a loss of USD 11.3 million for the company.
The losses probably contributed a lot to your decision to stop issuing these types of loans, as Carol Houle, CFO of her holding company Provident Bancorp, noted:
“As we reflect on what we have experienced in 2022, we want to learn the lesson and become a better and stronger bank. Despite our 2022 losses, we enter 2023 well capitalized and well diversified.”
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