Building on the original market positioning of Silicon Valley Bank, filling the gap in banking services for the cryptocurrency industry.
Written by: Azuma (@azuma_eth)
On July 3, multiple mainstream financial media outlets reported that several tech billionaires, including PayPal co-founder and Silicon Valley venture capital giant Peter Thiel, are jointly launching a new bank named Erebor, aimed at filling the banking service gap for the cryptocurrency industry following the collapse of Silicon Valley Bank.
The Financial Times reported that, aside from Peter Thiel, the billionaires initiating Erebor also include Palmer Luckey, co-founder of defense technology company Anduril, and Joe Lonsdale, founder of big data analytics company Palantir (which Peter Thiel is also a co-founder of). Thiel's venture capital fund, Founders Fund, will also directly invest in Erebor.
If the introduction of Palmer Luckey and Joe Lonsdale feels unfamiliar to many readers, let's put it another way: both of them, along with Peter Thiel, are significant financial backers of Donald Trump in the 2024 U.S. presidential election.
It is worth mentioning that the name Erebor is derived from the epic fantasy work "The Hobbit," where it is a "lonely mountain" occupied by the dragon Smaug, beneath which lies countless treasures of the dwarves. Additionally, the names Anduril and Palantir are also taken from this series; the former means the famous sword "Flame of the West," while the latter refers to a "crystal ball" that can see through time and space and understand everything in the world.
Erebor has applied for a national bank charter from the Office of the Comptroller of the Currency, which will allow Erebor to conduct banking operations. According to the application documents made public this week, Erebor will "act as a national bank… providing traditional banking products and services related to virtual currencies for businesses and individuals." Its target customers are companies in the innovative economy sector in the U.S., particularly tech companies focused on cryptocurrency, artificial intelligence, defense, and manufacturing, while also serving the employees and investors of these companies, and planning to provide services to foreign companies seeking access to the U.S. banking system.
The Financial Times specifically emphasized that Erebor hopes to take over the original market positioning of Silicon Valley Bank, providing banking services to high-risk businesses and cryptocurrency practitioners who may be rejected by traditional banks.
In 2023, Silicon Valley Bank, which had a glorious 40-year history and had won Forbes' "Best Bank in America" award for five consecutive years, declared bankruptcy due to a liquidity crisis. Many cryptocurrency-related projects/institutions, including BlockFi, Circle, and Avalanche, were clients of Silicon Valley Bank at the time, leading to a severe blow to the cryptocurrency industry, with BTC briefly falling below $20,000 in panic.
Insiders revealed that the co-founders of Erebor began discussing the establishment of the bank after the collapse of Silicon Valley Bank in 2023. Although Silicon Valley's assets were acquired and restarted by First Citizens Bank, and some professionals from the bank moved to HSBC USA, investors and executives of startup tech companies still generally complain about barriers to accessing banking services—many businesses find it difficult to obtain financing support at their previous levels.
Erebor stated in its application documents that stablecoin-related business will also be a top priority for the bank—stablecoins pegged to real assets like the U.S. dollar are expected to become a key focus of the bank's operations, with the document emphasizing its goal to become "the institution with the most comprehensive regulation for stablecoin trading."
Odaily Note: Banking services related to stablecoins and cryptocurrencies have become a new competitive focus, and Circle has recently submitted a bank license application. For details, see "With $60 Billion in Assets Self-Custodied, 'Stablecoin First Stock' Circle Applies for Federal Trust Bank License."
Insiders indicated that Palmer Luckey and Joe Lonsdale will not participate in the daily management of Erebor. The bank's co-CEOs will be Jacob Hirshman, who previously served as an advisor to Circle, and Owen Rapaport, co-founder and CEO of digital asset software company Aer Compliance. The former Senior Executive Vice President of Valley National Bank will serve as the bank's president.
Erebor's banking headquarters will be located in Columbus, Ohio, with an office in New York, but it will only provide digital services, with all products marketed through a smartphone app and website. Details regarding shareholder composition, equity structure, and business plans remain confidential.
With the successful passage of the GENIUS Act in the Senate and the new SEC chairperson's commitment to establishing a reasonable regulatory framework for the cryptocurrency market, investment and business activities related to cryptocurrencies are expected to continue to grow, while related banking services still have certain gaps. Including Erebor, several players have already noticed this opportunity.
In the foreseeable future, more intense competition is expected to emerge around this service, but for the cryptocurrency industry itself, which is troubled by conservative banking services, such competition may be more beneficial the more intense it becomes.
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