New Battleground of Financial Technology: Silicon Valley Pros Join Forces to Build an Encryption Bank

The collapse of a large tech bank in 2023 has brought a huge impact to the Financial Technology 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 financial institution named Erebor is being prepared with the joint efforts of Silicon Valley heavyweights such as technology billionaire Joe Lonsdale, virtual reality headset company founder Palmer Luckey, and renowned tech investor Peter Thiel.

The name Erebor comes from the "Lonely Mountain" in "The Hobbit," which is rich in treasure. This may also symbolize the grand goal of this bank: to find "treasure-like" financial services for emerging technology in the "desert" of traditional finance.

It is reported that Erebor not only targets the service gap left by a large technology bank but also positions stablecoins as a core strategy, aiming to become "the most regulated entity for conducting and promoting stablecoin transactions," signaling that the integration of traditional finance and encryption will enter a new stage.

Financial Technology companies urgently need new financial partners

A large technology bank once served as the "preferred bank" for American tech startups and the venture capital scene, providing services to many startups that were considered "high risk" by traditional large banks. From deposits and loans to investment banking, it covered almost every stage of the growth of tech companies. It is deeply integrated with Silicon Valley's entrepreneurial ecosystem, becoming an important financial partner for many innovative companies from incubation to listing.

However, excessive concentration on clients in the technology sector, a large amount of unrealized losses due to misjudgment of interest rate trends, and the speed and scale of bank runs in the era of social media ultimately triggered a liquidity crisis in March 2023.

Although the government quickly intervened afterwards and took emergency measures to protect depositors, traditional large banks generally remained cautious towards technology, especially high-risk encryption and AI startups, after the collapse of the bank. This led to a noticeable "vacuum" in financial services, making it urgent to find a "new backer" that understands and supports their development.

Erebor: The Ambition of the Giants

Erebor may have thus come into being, and its list of initiators is nothing short of luxurious:

Palmer Luckey: The legendary founder of a virtual reality (VR) headset company, who sold the company for a high price of $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 United States and its allies, rapidly rising as a new force in the defense technology sector with its fast iteration and disruption of traditional military giants.

Peter Thiel: A Silicon Valley legend with multiple identities: co-founder of a payment company, spiritual leader of "a payment company gang", co-founder of a big data company, early investor in a social platform, and head of a renowned venture capital firm.

Thiel is known for his unique liberalism and contrarian thinking. He has invested in several companies that are changing the world and has an unusual dedication to "disruptive innovation." He is also a proponent of encryption.

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

This layer of special political background undoubtedly adds strategic imagination to the future of Erebor. During Trump's second term, the regulatory environment in the United States embraced encryption, and Erebor's high-profile entry at this time may have been precisely aimed at seizing this "policy dividend window" and attempting to take the lead under the new regulatory framework.

The Ambition of Stablecoin Banks

According to its national bank license application, Erebor Bank will be headquartered in Columbus, Ohio, and will establish a secondary office in New York, adopting a digital-first operating model. It explicitly states that it will serve emerging technology companies in artificial intelligence, encryption, defense, and manufacturing, as well as investors and employees in these fields. This vertical segmentation and highly specialized market positioning is the key to Erebor's differentiation from traditional banks.

Erebor's core strategy 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. Stablecoins, as a type of encryption asset pegged to fiat currencies such as the US dollar, 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. Previously, financial technology companies and traditional financial institutions have begun to experiment with using stablecoins for cross-border settlements, while Erebor has elevated this to a strategic height within the core business of banking.

Jacob Hershman, one of the co-CEOs of Erebor, has previously served as an advisor for a well-known stablecoin company. As a primary issuer of USD stablecoins, the company's compliance framework has been an important gateway for traditional financial institutions to enter the encryption world. Hershman will replicate a similar path at Erebor, aiming to establish it as "the most regulated stablecoin trading execution and facilitation entity."

Through this strategy, Erebor not only hopes to become the "new financial backer" of Silicon Valley and the emerging technology sector, but also aims to serve as the "official bridge" connecting the US dollar and digital dollar. It could change the traditional ways businesses conduct cross-border transactions and manage digital assets, allowing stablecoins to truly enter mainstream finance. Previously, the new guidelines for the disclosure of encryption assets released by regulatory agencies also indirectly confirmed that regulators are actively preparing for the integration of digital assets into the traditional financial system, which aligns with Erebor's compliance path.

The Impact of the New Financial Landscape

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

For emerging technology companies, the emergence of Erebor is timely. In innovative fields such as AI and encryption, many startups have long faced the "cold shoulder" from traditional banks. The customized financial services offered by Erebor precisely address these companies' pain points 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 a stablecoin business under a strict regulatory framework, it will greatly promote the acceptance of digital assets by the mainstream market. This may attract more traditional institutional funds into the encryption field.

The emergence of Erebor is a warning sign for traditional banking. This new digital bank is competing for the most growth-potential technology customer base with precise positioning and professional background. In the face of such competitors, traditional banks may need to accelerate their pace of innovation and reassess their attitudes towards emerging technology. 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 of giants—Silicon Valley capital and Wall Street old money have all entered the arena, and now, Erebor, a company named after "Lonely Mountain", has joined the fray. Whether this company can find its own "Arkenstone" may become one of the most captivating stories of the coming years.