Silicon Valley pros join forces to create a new type of encryption bank Erebor, targeting the new blue ocean of Financial Technology.

The 2023 collapse of Silicon Valley Bank triggered a huge shock in the Financial Technology sector and exposed 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 group of heavyweight figures from Silicon Valley is in the process of establishing a new "encryption bank" named Erebor. The name, derived from the treasure-rich "Lonely Mountain" in "The Hobbit," seems to suggest the bank's grand vision: to provide "treasure-like" financial services for emerging technology companies in the "desert" of traditional finance.

Erebor not only targets the service gap for technology companies left by Silicon Valley Bank but also places stablecoins at the core of its strategy, aiming to become the "most regulated stablecoin trading entity." This signifies that the integration of traditional finance and encryption technology will enter a new phase.

Aftermath of Silicon Valley Bank's Collapse: High-Tech Companies Urgently Need New Financial Partners

Silicon Valley Bank was once the preferred bank for American technology startups and the venture capital community, providing comprehensive services to numerous startups that were deemed "high-risk" by traditional large banks. From deposits and loans to investment banking, it covered almost every stage of technology company growth. It was deeply integrated with Silicon Valley's entrepreneurial ecosystem, becoming a key financial partner for many innovative companies from incubation to IPO.

However, the excessive focus on clients in the technology sector, misjudgment of the Federal Reserve's interest rate hike cycle leading to huge unrealized losses, and the rapid spread of bank runs in the social media era ultimately triggered a liquidity crisis in March 2023.

Although the U.S. government quickly intervened and took emergency measures to protect depositors, traditional large banks have generally maintained a cautious attitude towards technology, especially high-risk startups in the encryption and AI fields, after the collapse of Silicon Valley Bank. This has resulted in a noticeable "vacuum" in financial services, making it urgent to find a new financial partner that understands and supports their development.

Erebor: The Ambitions of Tech Giants

Erebor has emerged, and its lineup of initiators can be described as luxurious:

Palmer Luckey: The legendary founder of the virtual reality (VR) headset company Oculus VR, who sold Oculus VR to Facebook (now Meta) for a high price of $2 billion, becoming a pioneer in the VR field. He then turned to the defense technology sector and co-founded Anduril Industries in 2017, a company focused on providing advanced AI-driven unmanned systems, sensors, and surveillance technologies for the U.S. and its allies. Anduril has rapidly risen to prominence in the defense technology sector with its fast iterations and momentum to disrupt traditional military giants.

Peter Thiel: A Silicon Valley legend with multiple identities: co-founder of a well-known payment platform, spiritual leader of the "PayPal Mafia", co-founder of big data company Palantir, early investor in a social media platform, and the captain of the renowned venture capital firm Founders Fund.

Thiel is known for his unique liberalism and contrarian thinking; he has invested in many companies that are changing the world, has an unusual obsession with "disruptive innovation," and is a proponent of encryption.

Joe Lonsdale: Co-founder of Palantir and political activist. Lonsdale is a protégé of Thiel and one of the co-founders of Palantir. After leaving Palantir, he founded another well-known venture capital firm, 8VC, which has invested in numerous emerging technology companies. Like Thiel, Lonsdale is also very politically active, being one of the main donors to a political figure's 2024 campaign.

This special political background undoubtedly adds strategic imaginative space for the future of Erebor. In certain policy environments, the regulatory landscape in the United States may adopt a more open attitude towards encryption, and Erebor's high-profile entry at this time may be precisely because it has seen this "policy dividend window," attempting to seize the opportunity under the new regulatory framework.

Committed to becoming the "most regulated" stablecoin bank

According to its national banking license application, Erebor Bank's headquarters will be located in Columbus, Ohio, with a secondary office established in New York, adopting a digital-first operational model. It explicitly states that it will serve emerging technology companies in fields such as artificial intelligence, encryption, defense, and manufacturing, as well as investors and employees in these sectors. This vertical segmentation and high degree of specialization in market positioning is the key distinction that sets Erebor apart from 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. Stablecoins, as a type of encryption asset pegged to fiat currencies like 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 started to experiment with using stablecoins for cross-border settlements, while Erebor has elevated this to a strategic level of core banking business.

One of the co-CEOs of Erebor, Jacob Hirshman, has served as an advisor to a well-known stablecoin company, which is a major issuer of USD stablecoins, and its compliance framework has been an important gateway for traditional financial institutions to enter the encryption world. Hirshman plans to 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 patron" of Silicon Valley and the emerging technology sector, but also aims to become the "official bridge" connecting the US dollar and 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 new guidelines related to encryption issued 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 Ambition of the New "Financial Backers" in Silicon Valley: What is the Impact?

Erebor Bank's entry 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 "cold shoulders" from traditional banks. The customized financial services provided 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, especially for Web3 companies, as financial service providers that focus 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 significantly promote the acceptance of digital assets in the mainstream market. This may attract more traditional institutional funds into the encryption field.

For traditional banking, the emergence of Erebor is a warning signal. This emerging digital bank, with its 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 attitude towards emerging technologies. In the future, we are likely to see more traditional banks begin to transform or choose to collaborate with specialized 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 are entering the arena one after another. Today, Erebor, a company named after "Lonely Mountain," has also joined this contest. Whether this company can find its own "Arkenstone" may become one of the most noteworthy stories in the coming years.