Massachusetts-Based Bankprov to End Loan Offerings Secured by Cryptocurrency Mining Rigs

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massachusetts-based-bankprov-to-end-loan-offerings-secured-by-cryptocurrency-mining-rigs

The Amesbury, Massachusetts-based Bankprov, a subsidiary of Provident Bancorp, has announced that it will no longer provide loans secured by cryptocurrency mining rigs. In a filing with the U.S. Securities and Exchange Commission (EX-99.1), Bankprov stated 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 Portfolio of Cryptocurrency Collateralized Loans Decreased by 65%

Bankprov disclosed that it holds approximately $41.2 million in cryptocurrency-collateralized loans, with about $26.7 million of the debt backed by crypto-mining equipment. Collateralized loans secured by application-specific integrated circuit (ASIC) mining rigs became a popular investment vehicle in 2021, but the crypto winter resulted in significant pressure on the industry. By the end of June 2022, Luxor executive Ethan Vera estimated that about $4 billion in loans backed by mining machines were under financial strain.

Since then, several crypto-mining companies have either sought bankruptcy protection or reorganized tens of millions in debt. For example, at the end of September 2022, the bitcoin mining firm Compute North filed for bankruptcy. Two months later, Core Scientific also filed for bankruptcy. Other mining operations are attempting to restructure debt. Greenidge Generation announced Tuesday that it has reorganized $11 million in debt with B. Riley.

Bankprov stated that it repossessed ASIC mining equipment from undisclosed crypto-mining operations in September. “Our digital asset loan portfolio declined by $79.3 million, or 65.8%, largely due to paydowns on outstanding lines of credit, the partial charge-off, and repossession of cryptocurrency mining rigs in exchange for forgiving a $27.4 million loan relationship,” according to Bankprov’s filing.

The financial institution’s EX-99.1 earnings filing added:

The portfolio of loans secured by cryptocurrency mining rigs will continue to decline as the Bank is no longer originating this type of loan.

Another crypto-friendly financial institution, Metropolitan Commercial Bank, announced during the second week of January 2023 that it plans to “exit its crypto-asset-related business.” Metropolitan stated that it holds no exposure to crypto assets, but has business relationships with four customers focused on cryptocurrencies. The bank did not specify an exact date, but said that these relationships and the crypto business will be phased out this year.

What do you think the future holds for banks and the cryptocurrency industry? Share your thoughts in the comments below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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