It’s been a tough year for cryptocurrency mining. Even after the manic bull run in 2021, mining has proven to be a very difficult business. In fact, hardware companies have even stopped taking orders for mining rigs.
Rabee Balouta, CEO of Bank Provident Bancorp, has announced that the company will be writing off loans secured by cryptocurrency mining rigs and has decided to halt its lending program for mining rigs.
The decision comes after a number of investors were unable to pay back their loans. The bank cites “market conditions” as the main reason for its actions.
The bank had previously offered loans to clients who wanted to purchase crypto mining rigs, but the drop in crypto prices in 2022 made it difficult for many customers to keep up with payments.
The holding company of BankProv, Provident Bancorp, wrote off a $47.9 million loan that was secured by the mining rigs, leading to a 50% drop in BankProv’s digital asset portfolio.
The bank also reported that it had repossessed some of the mining rigs and used them to write off outstanding loans, resulting in a $11.3-million loss for the company.
Due to these experiences and the increasing regulatory pressure on the industry, BankProv has decided to halt its loan program for crypto mining rigs.
The bank’s chief financial officer, Carol Houle, has announced that the team will absorb any losses incurred in 2022 and come out stronger in 2023.
The withdrawal of this financing option may have a significant impact on the crypto-mining industry, as many miners have relied on these loans to fund their operations. The end of such loans may force some miners to go through a rough phase, highlighting the challenges facing the crypto industry.
BankProv’s decision to write off crypto mining rig loans was a necessary step to ensure its financial stability and regulatory compliance.
Whether or not you’re a believer in Bitcoin and other cryptocurrencies, the drop in prices has dashed the hopes of many that mining rigs would be a quick way to strike it rich.
And for a bank like BankProv that focuses exclusively on crypto clients and loans, this was a major blow. The decline in value has also raised some concerns among regulators about the viability of crypto-backed loans. But it’s too early to tell whether these concerns will lead to stricter regulation—and whether that regulation may ultimately drive out banks like BankProv from the crypto scene altogether.