by • Massachusetts-based Bankprov subsidiary Provident Bancorp has announced that it will no longer provide loans secured by cryptocurrency mining rigs.
• Bankprov holds approximately $41.2 million in cryptocurrency-collateralized loans, with about $26.7 million of the debt backed by crypto-mining equipment.
• The crypto winter and industry pressure have caused Bankprov to repossess ASIC mining equipment from undisclosed crypto-mining operations in September.
The Amesbury, Massachusetts-based Bankprov, a subsidiary of Provident Bancorp, has announced that it will no longer offer loans secured by cryptocurrency mining rigs. This decision was made due to the increasing pressure on the industry caused by the crypto winter, and comes after Bankprov revealed that they hold approximately $41.2 million in cryptocurrency-collateralized loans, with about $26.7 million of the debt backed by crypto-mining equipment.
The crypto winter has caused significant financial strain on the industry, with Luxor executive Ethan Vera estimating that about $4 billion in loans backed by mining machines were under financial strain by the end of June 2022. Since then, several crypto-mining companies have either sought bankruptcy protection or reorganized debt. Companies such as Compute North, Core Scientific, and Greenidge Generation have all sought bankruptcy protection or restructured debt in the past few months alone.
Bankprov’s filing with the U.S. Securities and Exchange Commission (EX-99.1) noted that the company has repossessed ASIC mining equipment from undisclosed crypto-mining operations in September, and that revenue from its digital asset loan portfolio will continue to decrease as the company has discontinued new loan originations backed by mining equipment.
Bankprov’s decision to no longer offer loans secured by cryptocurrency mining rigs is reflective of the industry’s current financial climate, and serves as a warning to other companies that may be considering similar investments. Bankprov’s filing with the SEC has opened up a much-needed discussion about the long-term financial stability of the crypto-mining industry, and has raised questions about the future of crypto-backed loans in general.
