Unveiling Erebor: Peter Thiel's Crypto Bank, the Sunlight Group's Scheme

Original Article Title: "Unveiling Erebor: Peter Thiel's Crypto Bank, a Scheme of Trump Backers"

Original Article Author: Azuma, Odaily Planet Daily

On July 3, several mainstream financial media outlets reported that multiple tech billionaires, including PayPal co-founder and Silicon Valley venture capital guru Peter Thiel, are jointly launching a new bank called Erebor aimed at filling the banking service gap for the cryptocurrency industry left after the collapse of Silicon Valley banks.

The Financial Times reported that apart from Peter Thiel, the billionaires behind Erebor include Palmer Luckey, co-founder of defense technology company Anduril, and Joe Lonsdale, founder of the big data analytics company Palantir (where Peter Thiel is also a co-founder). Peter Thiel's venture capital fund Founders Fund will also directly invest in Erebor.

If introducing Palmer Luckey, Joe Lonsdale, or even Peter Thiel in this way might still be unfamiliar to many readers, let's put it this way: all three are key backers of Trump in the 2024 U.S. presidential election.

It is worth noting that the name Erebor is taken from the fantasy masterpiece "The Hobbit." In the book, Erebor is a "Lonely Mountain" occupied by the dragon Smaug, beneath which lies the endless treasure of the dwarf race. Furthermore, the names Anduril and Palantir are also from the same series, with the former meaning the famous sword "Flame of the West" and the latter meaning a "crystal ball" that can traverse time and space and see all things in the world.

Erebor has applied to the U.S. Federal banking regulator, the Office of the Comptroller of the Currency, for a national bank charter, which would allow Erebor to conduct banking operations. According to application documents made public this week, Erebor will "operate as a national bank... [to] offer traditional banking products and services related to virtual currencies". Its target customers are innovative economy sector companies in the U.S., especially technology companies focused on cryptocurrency, artificial intelligence, defense, and manufacturing, as well as their employees and investors. Erebor also plans to provide services to foreign companies seeking access to the U.S. banking system.

The Financial Times specifically emphasized that Erebor aims to take on the original market positioning of Silicon Valley Bank, providing banking services to high-risk businesses and cryptocurrency professionals who may be rejected by traditional banks.

In 2023, with a glorious 40-year history, Silicon Valley Bank, which had won the Forbes "Best Bank in America" award for five consecutive years, declared bankruptcy and closed due to a liquidity crisis. Many cryptocurrency-related projects/institutions, including BlockFi, Circle, and Avalanche, were clients of Silicon Valley Bank at the time. The cryptocurrency industry was severely hit, and amidst panic, BTC briefly dropped below $20,000.

Sources revealed that Erebor's co-founders began discussing the establishment of the bank after Silicon Valley Bank's collapse in 2023. Although Silicon Valley's assets were acquired and relaunched by First Citizens BancShares, and some professionals from that bank also moved to HSBC USA, investors and executives of early-stage tech companies commonly complained about obstacles in accessing banking services, with many businesses struggling to obtain the same level of funding support.

In its application documents, Erebor stated that stablecoin-related business would also be a key focus of the bank—stablecoins pegged to real-world assets like the US dollar are expected to be a key focus of its business. The documents emphasized its goal to become the institution with the most comprehensive stablecoin transaction regulation.

Odaily Note: Banking services around stablecoins and cryptocurrencies have become a new competitive focus, and Circle has recently submitted a banking license application.

Sources stated that Palmer Luckey and Joe Lonsdale will not be involved in the day-to-day management of Erebor. The bank's co-CEOs will be Jacob Hirshman, a former Circle advisor, and Owen Rapaport, co-founder and CEO of digital asset software company Aer Compliance. A former Senior EVP of Valley National Bank will serve as the bank's president.

Erebor's headquarters will be located in Columbus, Ohio, with a presence in New York, but only offering digital services. All products will be marketed through smartphone apps and websites. Parts of the application documents related to shareholder composition, equity structure, and business plans are still confidential.

With the smooth passage of the GENIUS Act in the Senate, the new SEC Chairman has personally pledged to establish a rational regulatory framework for the cryptocurrency asset market. Investment and operational activities related to cryptocurrency will inevitably continue to grow, while there is currently a gap in related banking services. Several players, including Erebor, have already taken notice of this opportunity.

In the foreseeable future, it is expected that there will be more intense competition around this service. However, for the cryptocurrency industry itself, troubled by conservative banking services, the more intense this competition, the better.