Tech Billionaires Launch Erebor Bank to Fill SVB’s Gap

Before collapsing in 2023, Silicon Valley Bank catered to startups and the cryptocurrency sector.

Now, a group of tech billionaires is reportedly aiming to fill the space left by the lender’s demise with the launch of a new bank, known as Erebor.

As the Financial Times (FT) reported Tuesday (July 1), sources familiar with the matter say this group is backed by Palmer Luckey, co-founder of military contractor Anduril.

Also involved, the sources said,  is Joe Lonsdale, founder of venture capital firm 8VC and a co-founder of Peter Thiel’s defense company Palantir. Thiel’s venture capital fund, Founders Fund, is also an investor, two of the sources said.

The report notes that the bank’s name — like that of Anduril and Palantir — is taken from fantasy writer J.R.R. Tolkein. In Tolkein’s “The Hobbit,” Erebor is a mountain overflowing with treasure.

According to the FT, Luckey and Lonsdale want Erebor to take up the space occupied by Silicon Valley Bank as a go-to financial institutions for riskier startups and crypto firms that traditional banks might otherwise reject.

“The bank will be a national bank . . . providing traditional banking products, as well as virtual currency-related products and services, for businesses and individuals,” Erebor said in its application for a banking charter.

The filing added that the bank would “differentiate itself” by doing business with customers that “are not well served by traditional or disruptive financial institutions, in particular with respect to insufficient access to credit.”

Stablecoins, the report added, are expected to be a major part of Erebor’s operations, with the application saying the bank wants to be “the most regulated entity conducting and facilitating stablecoin transactions.”

PYMNTS wrote earlier this week about the traditional finance world’s embrace of stablecoins in the wake of new U.S. regulations covering the digital currencies.

“With compliance pathways clearly spelled out,” that report said, players such as J.P. Morgan, Visa and Stripe now have the “legal cover to experiment” with tokenized dollars, with many of them already getting their blockchain initiatives underway.

“Everybody’s jumping into stablecoins right now,” Brett McLain, head of payments and blockchain at Kraken, said in an interview with PYMNTS. “All the big banks, they’re talking about creating their own; others want to leverage existing ones.”

However, that report added, regulatory implementation will still be complex, with the Treasury Department, Federal Reserve and the Financial Crimes Enforcement Network tasked with delineating compliance standards, audit protocols and licensing regimes.

“After all, most illicit activity on the blockchain now includes stablecoin use,” the report concluded.