A collective of influential tech billionaires, led by Oculus VR founder Palmer Luckey, is establishing a new U.S. bank focused on cryptocurrency, known as Erebor. Based in Columbus, Ohio, Erebor has applied for a national bank charter and plans to operate as a digital-only institution. The bank will be headed by co-CEOs Owen Rapaport and Jacob Hirshman, with Hirshman having previously served as an adviser to stablecoin company Circle.
Key Backers and Objectives
The financial backing for Erebor comes from prominent figures such as Luckey, Peter Thiel-backed Founders Fund, and Joe Lonsdale, co-founder of Palantir with Thiel. These backers have been significant donors to U.S. President Donald Trump’s 2024 campaign. Erebor aims to fill the gap left by the collapse of Silicon Valley Bank (SVB) in 2023, which was a major source of capital for technology ventures that struggled to meet traditional banking liquidity standards.
Differentiating Itself
Like SVB, Erebor plans to differentiate itself by serving entities and customers underserved by traditional financial institutions, particularly those with limited access to credit. To address concerns about liquidity issues similar to those that affected SVB, the backing group has announced plans to hold cryptocurrency stablecoins on its balance sheet. These stablecoins are pegged to traditional fiat currencies like the U.S. dollar, offering more stability than volatile cryptocurrencies such as Bitcoin.
Challenges and Competition
While holding stablecoins can provide stability, it’s not foolproof, as evidenced by the 2022 collapse of TerraUSD and Luna, which destroyed $45 billion in value overnight. Despite this risk, cryptocurrency assets have become more common on financial organizations’ balance sheets for holding value and facilitating cross-border payments. Erebor aims to become “the most regulated entity conducting and facilitating stablecoin transactions.” However, it faces stiff competition as major banks explore creating their own stablecoins or leveraging existing ones.
Regulatory Landscape
Regulation in this new banking space is expected to evolve, but there’s a clear push to integrate stablecoins into modern finance and credit, with Erebor positioning itself at the forefront. The development comes as cryptocurrency continues to play a larger role in financial services, with various institutions navigating the opportunities and challenges presented by digital assets.
