Giants join forces to bet on crypto banks, and a group of Silicon Valley bigwigs are preparing to build Erebor

Author: BitpushNews

The collapse of Silicon Valley Bank (SVB) in 2023 brought a huge shock to the technology finance industry, and also left a service gap that urgently needs to be filled. Now, a new battle to reshape the financial landscape is quietly opening.

According to the latest news from the Financial Times, a new "crypto bank" called Erebor is being prepared, driven by technology billionaire Joe Lonsdale, a staunch ally of US President Trump, as well as Silicon Valley giants such as Oculus VR founder Palmer Luckey and Paypal co-founder Peter Thiel.

 Peter Thiel (right), Palmer Luckey (center) and Joe Lonsdale (left)

The name Erebor comes from the "Lonely Mountain" in "The Hobbit" which is rich in treasures. This may also symbolize the bank's grand goal: to find "treasure-like" financial services for emerging technologies in the "desert" of traditional finance.

It is reported that Erebor not only aims at the service gap of technology enterprises left by SVB, but also takes stablecoin as its core strategy. Its goal is to become "the most regulated entity to conduct and promote stablecoin transactions", which indicates that the integration of traditional finance and crypto will enter a new stage.

The "unresolved pain" of SVB's bankruptcy: high-tech companies are urgently looking for new "backers"

Silicon Valley Bank (SVB) was once the "royal bank" of American technology startups and venture capital circles, and has provided services to countless startups that were considered "high-risk" by traditional large banks. From deposits, loans to investment banking, it covers almost every stage of the growth of technology companies. It is deeply tied to the entrepreneurial ecosystem of Silicon Valley and has become an important financial partner for many innovative companies from incubation to listing.

However, excessive concentration on technology industry clients, large unrealized losses resulting from misjudgment of the Federal Reserve's interest rate hike cycle, and the speed and scale of bank runs in the social media era ultimately triggered a liquidity crisis in March 2023.

Although the U.S. government intervened quickly and protected depositors through emergency measures, traditional large banks generally continued to be cautious about technology, especially high-risk startups in the encryption and AI fields, after the collapse of SVB, resulting in an obvious financial services "vacuum" in the market. Finding a "new backer" that understands and supports their development has become a top priority.

Erebor, the “Lonely Mountain” Bank: The Ambition of the Giants

Perhaps this is why Erebor was born, and its list of founders is quite impressive:

Palmer Luckey: The legendary founder of virtual reality (VR) headset company Oculus VR, he sold Oculus VR to Facebook (now Meta) for a high price of $2 billion, becoming a pioneer in the VR field. Palmer Luckey then turned to defense technology and co-founded Anduril Industries in 2017, a company focused on providing advanced AI-driven unmanned systems, sensors and surveillance technologies to the United States and its allies. Anduril has quickly risen to become a new star in the defense technology field with its rapid iteration and momentum to subvert traditional military giants.

Peter Thiel: A Silicon Valley legend with multiple identities: co-founder of PayPal, spiritual leader of the "PayPal Mafia", co-founder of big data company Palantir, early investor in Facebook, and helmsman of the famous venture capital firm Founders Fund.

Peter Thiel is known for his unique liberalism and contrarian thinking. He has invested in many world-changing companies such as SpaceX and Airbnb. He has an extraordinary obsession with "disruptive innovation" and is also a supporter of cryptocurrency.

Joe Lonsdale: Palantir co-founder and political activist. Joe Lonsdale is a disciple of Peter Thiel and one of the co-founders of Palantir. After leaving Palantir, he founded another well-known venture capital firm, 8VC, and invested in many emerging technology companies. Like Thiel, Lonsdale is also very active in politics and is one of the main donors to US President Trump's 2024 campaign.

This special political background undoubtedly adds strategic imagination space for Erebor's future. During Trump's second term, the US regulatory environment embraced encryption. Erebor's high-profile entry at this time may have been aimed at this "policy dividend window" and tried to seize the initiative under the new regulatory framework.

Want to be the "most regulated" stablecoin bank

According to its national banking license application, Erebor Bank will be headquartered in Columbus, Ohio, with a secondary office in New York, and adopt a digital-first operating model. It explicitly stated that it will serve emerging technology companies such as artificial intelligence, cryptocurrency, defense, and manufacturing, as well as investors and employees in these fields. This vertical segmentation and highly specialized market positioning is the key to Erebor's difference from traditional banks.

Erebor's core strategy also lies in its deep embrace of stablecoins and its vision of compliance.

It is reported that Erebor plans to include stablecoins in its balance sheet. As a crypto asset pegged to fiat currencies such as the US dollar, stablecoins are increasingly becoming a key tool for accelerating cross-border payments, simplifying settlements, and expanding the accessibility of digital financial services due to their value stability, high transaction efficiency, and low cost. Previously, fintech companies and traditional financial institutions have begun to try to use stablecoins for cross-border settlements, and Erebor has elevated this to the strategic level of the core business of banks.

Jacob Hirshman, one of the co-CEOs of Erebor, has served as an advisor to the well-known stablecoin company Circle. As the main issuer of the US dollar stablecoin USDC, Circle's compliance framework has always been an important channel for traditional financial institutions to enter the crypto world. Hirshman will replicate a similar path in Erebor and build it into "the most regulated stablecoin transaction execution and facilitation entity."

Through this strategy, Erebor hopes to become not only the "new financier" of Silicon Valley and emerging technology, but also the "official bridge" connecting the U.S. dollar and the digital dollar. It may change the traditional way companies conduct cross-border transactions and manage digital assets, allowing stablecoins to truly enter mainstream finance. Previously, the new guidelines for the disclosure of crypto ETPs issued by the SEC's corporate finance department also indirectly confirmed that regulators are actively preparing for the integration of digital assets into the traditional financial system, which coincides with Erebor's compliance path.

The ambitions of Silicon Valley’s new money men: Who will benefit and who will be under pressure?

The entry of Erebor Bank is bound to create ripples in the field of technology finance, and its impact will be multi-dimensional:

For emerging technology companies, the emergence of Erebor is timely. In innovative fields such as AI and encryption, many start-ups have long been "cold-shouldered" by traditional banks. The customized financial services provided by Erebor just solve the pain points of these companies in financing, operations and compliance, allowing them to focus more on technological innovation. Especially for Web3 companies, this financial service provider focusing on blockchain technology is undoubtedly good news.

For the entire crypto industry, Erebor may become an important compliance benchmark. If it can successfully operate a stablecoin business under a strict regulatory framework, it will greatly promote the acceptance of digital assets by the mainstream market. This may attract more traditional institutional funds to enter the crypto field.

For the traditional banking industry, the emergence of Erebor is a warning signal. With its precise positioning and professional background, this emerging digital bank is competing for the most promising technology customer base. Faced with such competitors, traditional banks may need to speed up their pace of innovation and re-evaluate their attitude towards emerging technologies. In the future, we are likely to see more traditional banks begin to transform or choose to cooperate with professional digital financial service providers.

In short, the competition in the crypto world is increasingly like a game of giants - Silicon Valley capital and Wall Street old money have entered the market one after another, and now Erebor has also joined the race. Whether this company named "Lonely Mountain" can find its own "Akon Gem" may become one of the most interesting stories in the next few years.