Unveiling Erebor: Peter Thiel's encryption bank, the covert scheme of Trump's financiers

Original | Odaily Odaily Daily ( @OdailyChina )

Author | Azuma (@azuma_eth)

On July 3rd, 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, apart 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 (of which Peter Thiel is also a co-founder), while Peter Thiel's venture capital fund Founders Fund will also directly invest in Erebor.

If introducing Palmer Luckey and Joe Lonsdale might leave many readers unfamiliar, then let's rephrase: the two, along with Peter Thiel, are significant financial backers of Trump in the 2024 U.S. presidential election.

It is worth mentioning that the name Erebor is derived from the fantasy epic "The Hobbit," where it is a "lonely mountain" occupied by the dragon Smaug, hiding countless treasures of the dwarves beneath it. In addition, the names Anduril and Palantir are also taken from the series; the former means the famous sword "Flame of the West," while the latter refers to a "crystal ball" that can traverse time and space, perceiving 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 operate as a bank. According to application documents made public this week, Erebor will "operate as a national bank... providing traditional banking products and virtual currency-related services for businesses and individuals", with its target customers being companies in the innovative economy sector in the United States, particularly tech companies focused on cryptocurrencies, artificial intelligence, defense, and manufacturing, while also serving the employees and investors of these companies, and plans to provide services to foreign companies seeking access to the U.S. banking system.

The Financial Times particularly emphasizes that Erebor hopes to take over the market positioning originally held by Silicon Valley Bank, providing banking services for high-risk enterprises and cryptocurrency practitioners who may be rejected by traditional banks.

In 2023, Silicon Valley Bank, which had a glorious history of 40 years and had won the 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. In a panic, BTC briefly fell below $20,000.

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 BancShares, and some professionals from the bank transitioned to HSBC USA, investors and executives from startup tech companies still generally complain about obstacles in obtaining banking services — many businesses find it difficult to receive 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 — the stablecoins pegged to real assets such as the US dollar are expected to become the focus of its business, and the document emphasizes 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 its application for a banking license. For more details, see "$60 Billion Asset Self-Custody, 'First Stablecoin Stock' Circle Applies for Federal Trust Bank License."

According to informed sources, Palmer Luckey and Joe Lonsdale will not participate in the daily management of Erebor. The co-CEOs of the bank 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 president.

The headquarters of Erebor Bank will be located in Columbus, Ohio, and there will be an office established in New York, but it will only offer digital services, with all products marketed through a smartphone application and website. The parts of the application documents that involve details about shareholder composition, equity structure, and business plans are still confidential.

As the "GENIUS Act" successfully passed through the Senate, the new SEC chairperson has promised to establish a reasonable regulatory framework for cryptocurrency markets. Investment and business activities related to cryptocurrencies are bound to continue growing, while there are still certain gaps in related banking services. Multiple players, including Erebor, have already noticed this piece of the pie.

In the foreseeable future, more intense competition is expected to emerge around this service, but for the cryptocurrency industry itself, which is plagued by conservative banking services, the more intense this competition, the better.