Oculus VR founder and flip-flop evangelist, Palmer Luckey is part of a collective of tech billionaires who are founding a new crypto-focused U.S. bank called Erebor. This bank will focus on providing capital for technology start-ups, AI-ventures, defence and manufacturing industries, and cryptocurrency endeavours, as well as for individuals looking to invest in these spaces.
The Columbus, Ohio-based Erebor has applied for a national bank charter, and is pushing a digital-only model. It will be headed by co-CEOs Owen Rapaport and Jacob Hirshman, the latter of whom was a former adviser to stablecoin company Circle, as per Reuters.
While they’ll be the face of the company, the money behind it is coming from billionaires like Luckey. He’s joined by the Peter Thiel-backed Founders Fund, and Joe Lonsdale, who co-founded Palantir with Thiel. Both are cited as major donors to U.S. President, Donald Trump’s 2024 campaign.
The bank is looking to fill the empty boots of Silicon Valley Bank (SVB), which collapsed in 2023 amidst an insolvency crisis. Before collapsing, SVB was the most popular bank for new technology ventures and was often seen as a source of capital for enterprises that wouldn’t meet liquidity standards for more traditional banking organizations.
Like SVB, the filing suggests Erebor would look to “differentiate itself,” by doing business with entities and customers that are not as well served by traditional financial institutions. It would particularly look to serve those with “insufficient access to credit.”
In an effort to head off concerns of SVR-like liquidity issues at Erebor, the backing group has announced that they’ll hold cryptocurrency stablecoins on its balance sheet. These crypto assets have their value pegged to traditional fiat currencies like the U.S. dollar, which can provide more stability for their value than other, more volatile cryptocurrencies like Bitcoin.
That hasn’t proved foolproof in the past, though, as the TerraUSD algorithmic stablecoin and Luna cryptocurrency collapsed in 2022, destroying $45 billion in value overnight.
However, cryptocurrency assets have become increasingly common on the balance sheets of many financial organizations in recent years as a way to hold value and to accelerate cross-border payments which can be slow and fraught with fees.
Erebor said that it aimed to become "the most regulated entity conducting and facilitating stablecoin transactions", in its charter application.
It may have stiff competition, though. PYMNTS quotes Brett McLain, head of payments at cryptocurrency exchange, Kraken, ““Everybody’s jumping into stablecoins right now [...] “All the big banks, they’re talking about creating their own; others want to leverage existing ones.”
Regulation of this new banking space is expected to take some time, but the impetus is clearly there to make stablecoins a major component of modern finance and credit, and Erebor is looking to be at the forefront of that new endeavour.
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