U.S. regulators on Wednesday gave preliminary approval to Erebor, a new bank designed to serve cryptocurrency companies and technology startups that were left adrift by the collapse of Silicon Valley Bank.
The Office of the Comptroller of the Currency (OCC) said Erebor was granted “preliminary and conditional” approval after reviewing its application. This comes four months after it applied for a national bank charter in June. It added that the bank still has several requirements to meet, including checks on its compliance and security systems, before it can officially open, which is expected to take several more months.
“We want to be a stable, low-risk, reliable bank doing normal banking things without screwing everyone over with undue risk,” a person close to Erebor, told the Financial Times. Erebor “getting approval so fast is a reflection of its extremely conservative business plan”, they stated, adding that Erebor was not going to be a “wacky, techno crypto bank”.
The bank was founded by Palmer Luckey, co-founder of defense contractor Anduril, and Joe Lonsdale, co-founder of Palantir (PLTR) and head of venture firm 8VC. Early investors include Peter Thiel’s Founders Fund and Haun Ventures, a crypto-focused venture capital firm. In addition to offering traditional banking products, the firm has also proposed managing cryptocurrency-related products and services.
USD-pegged stablecoins like Circle’s (CRLC) USDC (USDC) and Tether’s USDT (USDT) are anticipated to form a significant portion of Erebor’s operations. In its application, Erebor said stablecoin-related services would be among the four main categories it plans to offer its clients. It also stated that it would hold certain cryptocurrencies on its balance sheets, which will be used for operational purposes.
“The Bank's goal is to be the most regulated entity conducting and facilitating stablecoin transactions and to bring this modern form of traditional financial intermediation fully within the regulatory perimeter,” the bank wrote in its application documents. Erebor’s charter positions it to serve businesses in the U.S. “innovation economy,” particularly those in cryptocurrencies, artificial intelligence, defense, and manufacturing, alongside employees and investors in these sectors.
The bank’s namesake, Erebor, is the “lonely mountain” in J.R.R. Tolkien’s The Lord of the Rings, which contains treasures of gold and jewels guarded by the dragon Smaug.
Meanwhile, the cryptocurrency market slid 1.2% in midday trade on Wednesday, falling to a market capitalization of $3.8 trillion. Bitcoin’s price was down 0.4% in the last 24 hours; however, retail sentiment on Stocktwits around the leading cryptocurrency continued to trend in ‘bullish’ territory amid ‘high’ levels of chatter.
Read also: Ethereum, Solana Outpace Bitcoin Gains As Crypto Market Gains After Fed Signals More Scope For Rate Cuts
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