Silicon Valley pros join forces to establish a new type of encryption bank

The 2023 collapse of a well-known bank has caused a huge shock in the fintech sector, leaving a service gap that urgently needs to be filled. Now, a new battle to reshape the financial landscape is quietly unfolding.

According to reports, a new type of "encryption bank" named Erebor is being planned, driven by tech billionaires like Joe Lonsdale, virtual reality pioneer Palmer Luckey, and notable investor Peter Thiel among other tech giants.

The name Erebor comes from the "Lonely Mountain" in literary works, rich in treasures, perhaps symbolizing the grand goal of this bank: to find "treasure-like" financial services for emerging technologies in the "desert" of traditional finance.

It is reported that Erebor not only targets the service gap left by a well-known bank for tech companies but also considers stablecoins as a core strategy. Its goal is to become "the most regulated entity for conducting and promoting stablecoin transactions," indicating that the integration of traditional finance and encryption will enter a new stage.

Tech companies are urgently seeking new "backers"

A well-known bank was once the "go-to bank" for American tech startups and the venture capital world, providing services to countless startups that traditional large banks regarded as "high-risk". From deposits and loans to investment banking, it covers almost every stage of tech company growth. It is deeply tied to Silicon Valley's entrepreneurial ecosystem, becoming an important financial partner for many innovative companies from incubation to listing.

However, the excessive focus on technology sector clients, the significant unrealized losses resulting from misjudgments regarding 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 quickly intervened afterwards and took emergency measures to protect depositors, traditional large banks generally continued to be cautious towards technology, especially high-risk encryption and AI startups, after the incident. This led to a noticeable "vacuum" in financial services, making it urgent to find a "new backing" that understands and supports their development.

"Erebor" Bank of "Lonely Mountain": The Ambitions of the Giants

Erebor was born out of necessity, and its list of founders is impressive:

1. Palmer Luckey: The legendary founder of a virtual reality (VR) headset company, who sold the company to a social media giant for a staggering $2 billion, becoming a pioneer in the VR field. He then transitioned to defense technology and co-founded a company in 2017 focused on providing advanced AI-driven unmanned systems, sensors, and surveillance technology for the U.S. and its allies.

2. Peter Thiel: A Silicon Valley legend with multiple identities: co-founder of a payment platform, co-founder of a big data company, early investor in a social platform, and the founder of a well-known venture capital firm. Known for his unique libertarian views and contrarian thinking, he has invested in several world-changing companies and has an unusual obsession with "disruptive innovation." He is also an advocate of encryption.

3. Joe Lonsdale: Co-founder of a big data company and political activist. He is a protégé of Peter Thiel and one of the co-founders of the company. After leaving, he founded another well-known venture capital firm and invested in many emerging technology companies. Like Thiel, Lonsdale is also very politically active and is one of the main donors to a certain presidential candidate's 2024 campaign.

This special political background undoubtedly adds strategic imagination to the future of Erebor. In a specific political environment, the regulatory environment in the United States embraces encryption, and Erebor's high-profile entry at this time may be precisely aimed at seizing this "policy dividend window" in an attempt to gain an advantage under the new regulatory framework.

Build the "Most Regulated" Stablecoin Bank

According to its application for a national banking license, Erebor Bank's headquarters will be located in Columbus, Ohio, with a second office established in New York, adopting a digital-first operating model. It explicitly states that it will serve emerging tech companies in artificial intelligence, encryption, defense, and manufacturing, as well as investors and employees in these fields. This vertical segmentation and high level of specialization is the key differentiator for Erebor compared to traditional banks.

Erebor's core strategy also lies in its deep embrace of stablecoins and its vision for compliance. It is reported that Erebor plans to incorporate stablecoins into its balance sheet. As a type of encryption 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 costs.

Jacob Hirschman, one of the co-CEOs of Erebor, previously served as an advisor for a well-known stablecoin company, which is a major issuer of USD stablecoins and whose compliance framework has been an important gateway for traditional financial institutions to enter the encryption world. Hirschman will replicate a similar path at Erebor, positioning it as the "most regulated stablecoin trading execution and promotion entity."

Through this strategy, Erebor not only hopes to become the "new financier" of Silicon Valley and the emerging technology sector, but also aims to serve as the "official bridge" connecting the US dollar with digital dollars. It could change the traditional ways businesses conduct cross-border transactions and manage digital assets, allowing stablecoins to truly enter mainstream finance. Previously, the relevant guidelines issued by regulators also indirectly confirmed that efforts are being made to integrate digital assets into the traditional financial system, aligning with Erebor's compliance path.

The Influence of the New "Investor" in Silicon Valley

The entry of Erebor Bank is bound to create ripples in the fintech sector, and its impact will be multidimensional:

The emergence of Erebor comes at the right time for emerging tech companies. In innovative fields such as AI and encryption, many startups have long faced a "cold shoulder" from traditional banks. The customized financial services provided by Erebor precisely address the pain points these companies face in financing, operations, and compliance, allowing them to focus more on technological innovation. This is undoubtedly good news for Web3 companies, as a financial service provider that focuses on blockchain technology.

For the entire encryption industry, Erebor may become an important compliance benchmark. If it can successfully operate its stablecoin business under a strict regulatory framework, it will greatly advance the process of digital assets being accepted by the mainstream market. This may attract more traditional institutional funds into the encryption field.

The emergence of Erebor is a warning signal for traditional banking. This new digital bank, leveraging precise positioning and professional background, is vying for the technology customer base with the greatest growth potential. In the face of such competitors, traditional banks may need to accelerate their pace of innovation and reassess their attitudes towards emerging technologies. In the future, we are likely to see more traditional banks begin to transform or choose to collaborate with professional digital financial service providers.

In short, the competition in the encryption world is increasingly resembling a game among giants—Silicon Valley capital and Wall Street old money are all entering the arena. Now, Erebor, a company named after the "Lonely Mountain," has also joined this contest. Whether this company can find its own "gem" may become one of the most intriguing stories in the coming years.