Cryptocurrency-friendly American BankProv has announced that it will no longer provide loans secured by cryptocurrency mining equipment. The bank has already written off similar loans for $47.9 million.
The bank filed an official statement with the US Securities and Exchange Commission (SEC) that it is getting rid of such loan obligations. In the fourth quarter of 2022, the volume of BankProv mining equipment-backed loans almost halved compared to the third quarter. In total, according to the data at the end of the year, the bank issued loans to companies related to digital assets for $41.2 million. At the same time, loans in the amount of $26.7 million were secured by mining equipment.
Mining companies have raised enough loans to expand their business during the 2021 bull run. Often, they used their cryptocurrency mining equipment as collateral. For example, Core Scientific’s liabilities are $1.3 billion, and Marathon owes $851 million to creditors. The cost of mining equipment has dropped significantly, and now loans are only partially secured.
BankProv took away equipment from mining companies in the fall of last year in exchange for writing off loans. This resulted in a loss of $11.3 million.
“We strive to learn from the events of 2022, to become better and stronger. Despite the losses, we are entering 2023 with a well-capitalized and excellent business diversification,” says Carol Houle, CFO of Provident Bancorp, which includes BankProv.
In early January, data center operator Core Scientific announced that 37,000 mining devices of the Celsius crypto lender had been disabled due to lack of payment.