Crypto-friendly bank ends loans backed by crypto mining rigs
The holding firm for the crypto-friendly financial institution, BankProv, has revealed it’s now not offering loans secured by cryptocurrency mining rigs after writing off $47.9 million in loans primarily secured by them all through 2022.
According to a Jan. 31 submitting with the USA Securities and Trade Fee (SEC), BankProv has practically halved the proportion of its digital asset portfolio consisting of rig-collateralized debt since Sep. 30, 2022.
The financial institution held $41.2 million in digital asset-related loans as of Dec. 30 final yr, consisting of $26.7 million price of loans collateralized by crypto mining rigs, which “will proceed to say no because the Financial institution is now not originating such a mortgage.”
The crypto mining trade has taken on big quantities of debt through the 2021 bull market, typically providing up mining rigs they personal as collateral as a way to decrease their rates of interest.
The next bear market beginning in 2022 resulted in powerful circumstances for miners, and lots of have been compelled to promote the Bitcoin (BTC) mining rigs they owned to cowl working prices, inflicting mining {hardware} costs to plummet.
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Regardless of the falling costs, some banks that had issued mining rig-collateralized debt have been compelled to repossess a number of the miners used as collateral.
According to a earlier SEC submitting, BankProv repossessed mining rigs in change for the forgiveness of $27.4 million in loans on Sep. 30, 2022, which resulted in an $11.3 million write-off for the agency.
The losses doubtless contributed closely to its choice to cease issuing most of these loans, with Carol Houle, the chief monetary officer of its holding firm Provident Bancorp, noting:
“As we mirror on 2022, we’re wanting to take its classes and emerge a greater, stronger financial institution. Regardless of our 2022 losses, we enter 2023 properly capitalized and properly diversified.”
