BankProv’s Bold Move
In a surprising twist for those involved in the cryptocurrency space, BankProv has officially announced that it will no longer provide loans secured by cryptocurrency mining rigs. This decision comes after a staggering loss of $47.9 million attributed primarily to such loans in 2022. If you think that’s a massive sum, just imagine the size of the paper trail involved!
The Downward Spiral of Crypto Mining Loans
According to a filing with the SEC dated January 31, BankProv has slashed the percentage of its digital asset portfolio tied to rig-collateralized debt. As of December 30, 2022, the bank still held $41.2 million in digital asset-related loans, but the proportion that was linked to mining rigs has seen a significant drop. In simpler terms, that’s like deciding to give up your endless coffee runs because you learned your barista has a side hustle flipping NFTs.
The Rise and Fall of Mining Debt
During the crypto gold rush of 2021, many miners were snowed under by huge debts, often using their mining rigs as collateral for loans to secure lower interest rates. Fast forward to 2022, and the bear market hit hard, with miners frequently offloading their equipment to stay afloat and cover operational costs. Remember the highs of 2021? Yeah, well, it was all downhill from there.
Repo Madness
As the downfall continued, some banks began the unfortunate process of repo-ing the mining rigs. In a prior SEC announcement, BankProv detailed the repo-ing of rigs in exchange for $27.4 million in loan forgiveness on September 30, 2022. This move resulted in an $11.3 million write-off. The words ‘capital loss’ were probably flashing like neon signs in their boardroom.
A Light at the End of the Tunnel?
“As we reflect on 2022, we are eager to take its lessons and emerge a better, stronger bank,” – Carol Houle, CFO of Provident Bancorp.
Despite their recent setbacks, BankProv remains optimistic. As it steps into 2023, Houle emphasized that the bank is entering the new year with solid capital and diversification. It seems that while they might be trading in their mining loans, they’re gearing up to scramble for new opportunities in this unpredictable crypto landscape.
