Massachusetts-based BankProv has announced that it will no longer offer loans that are collateralized with cryptocurrencies mining machines.
What Happened: In a Tuesday filing with the SEC, the bank's holding company, Provident Bank, said the bank's portfolio of digital-asset loans had declined by 50% in the fourth quarter due to the sale of impaired loans and the repayment of a line of credit.
At the end of December, BankProv held $41.2 million in digital-asset related loans, with $26.7 million of that being collateralized by cripto-mining machines.
The amount will decline as the Bank is no longer originating this type of loan, according to the bank. The mining industry used mining machines as collateral to secure loans, and often used the funds to buy more machines in the past.
The model started to unravel as the bear market took hold and mining machine prices plummeted by 85% in 2022, according to Luxor Technologies, which was analyzed by CoinDesk.
This resulted in margin calls and collateral seizures as borrowers were unable to service their debt.
BankProv wrote off $47.9 million in net charge-offs through 2022, mainly from loans collateralized by mining rigs.
In September, the bank repossessed mining machines in exchange for $27.4 million of debt for unidentified parties.
As of December, BankProv had a total of $1.42 billion in net loans.
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