Tech Billionaires Launch Erebor Bank

Anduril co-founder Palmer Luckey and Palantir co-founders Joe Lonsdale and Peter Thiel have filed a bank charter for a new financial institution called Erebor Bank, which will focus on providing services for high-risk industries, such as AI, crypto, and defense tech.

The Big Picture: The Trump administration has significantly rolled back regulations around establishing new banks, prompting crypto firms like Circle and Ripple to apply for charters and pave the way for a new financial era. If Erebor gets the green light, it aims to fill the gap left by the 2023 collapse of Silicon Valley Bank.

Between the Accounts: As noted by Wired, Erebor Bank is named after a term from J.R.R. Tolkien’s Middle-earth books, similar to Anduril and Palantir. Erebor is the name of the mountain where the dragon Smaug hoards treasure.

That’s what Erebor wants to do for Silicon Valley.

• The bank — which will be run by a mix of banking, crypto, and VC execs — is launching with over $250 million in funding from Luckey, Lonsdale’s VC firm 8VC, Thiel’s Founders Fund, VC firm Haun Ventures, and several unnamed investors.
• If granted its charter, Erebor will be able to “accept deposits, make loans, and be eligible for Federal Reserve payment systems as well as FDIC insurance.”
• Just like Silicon Valley Bank before it, Erebor’s prospective business clients will be those “not well served by either traditional or disruptive financial institutions, in particular with respect to insufficient access to credit” (i.e., Silicon Valley startups).
• The bank also hopes to become the leading institution in crypto-banking products, including becoming “the most regulated entity conducting and facilitating stablecoin transactions” and facilitating “broader acceptance of stablecoins,” per its June filing.

Final Balance: Erebor’s focus on frontier industries like AI, crypto, and defense isn’t surprising, given the background (and sources of wealth) of its founders — all areas currently flooded with investment. That should give the bank ample cash to fill the vaults… or at least plenty of 1s and 0s on the bank’s mainframe, considering its focus on stablecoins.

Stablecoins — cryptos typically tied to fiat currencies — are less volatile than cryptocurrencies like Bitcoin and Ethereum, while still providing the upside of blockchain technology. But their use could also cause several disruptions to the broader economy (the whole Silicon Valley ethos in a nutshell).

Prediction: Considering the deepening ties between the White House and Silicon Valley, Erebor could become the go-to stablecoin processor for the government.