Erebor, a startup bank backed by prominent tech figures with a business plan similar to that of now-infamous Silicon Valley Bank, has submitted an application for a national bank charter.
In an application dated June 11, Erebor says it's seeking a national bank charter to provide crypto-related products to the "innovation economy," including tech companies, artificial intelligence, defense and manufacturing entities. The application also notes the firm aims to serve "high and ultra-high net worth" individuals who aim to invest in these industries as well as providing deposit and payment services to foreign banking organizations. Erebor is not aiming to have a bank holding company or branches during its first three years of operation, but aims to be the "most regulated entity conducting and facilitating stablecoin transactions."
The application seizes on the current administration's signaled openness to new tech-oriented banking models and raises questions about how regulators will deal with the massive political influence of the firm's backers, says Todd Baker, a senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University and managing principal of Broadmoor Consulting.
"It's a good thing that new banks are being chartered and it's a good thing that new technology-focused banks are being chartered," Baker said. "The only question here is whether there will be special treatment because of the political connections between the backers and the White House."
Erebor's tech-titan backers — including Palmer Luckey, founder of Oculus VR and defense-tech firm Anduril, and Peter Thiel, co-founder of PayPal, defense firm Palantir and Founders Fund — are major donors to President Trump and have
Erebor's charter application reflects a broader shift many in the industry anticipated following the 2024 election, according to Carleton Goss, a partner at Hunton Andrews Kurth LLP and a former OCC lawyer.
"It's the kind of charter that I think we all knew was coming since the election, so I'm not surprised to see a new charter application with more of a cryptocurrency component," he said. "It looks like they're a well funded group with some good, established, large community bank kind of experience."
The current regulatory climate is markedly different from the previous administration's more hostile stance toward digital banking models. This de novo bank, with its crypto emphasis and strong capitalization, challenges regulators to carefully evaluate a complex business plan, especially since the bank clearly targets a tech-savvy, affluent clientele.
"Regulators have generally indicated that the attitudes that were prevalent during the last administration around the risk of more digital-banking models are no longer in place," Baker said. "The focus on crypto is very much consistent with the administration's efforts to promote crypto and wherever it appears, and those actions appear more closely tied to who political contributors are than to issues that might exist with the safety and soundness of the banking system."
Erebor Bank will have a lengthy approval process in store, requiring sign-off from the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve. The OCC typically grants conditional approval first. While FDIC approval of deposit insurance for national banks is often routine once the OCC signs off, novel business models like Erebor's can trigger closer scrutiny, says Goss.
"When there are activities that are novel, the FDIC tends to take their time, getting themselves satisfied that the de novo won't present a material risk to the FDIC fund," Goss said. "But I have to imagine that, given the current kind of political climate, the fact that they're probably well funded, the fact that it looks like they do have established leadership proposed for the bank … I think the FDIC will eventually get on board."
Given that the new bank is aiming at a similar business model to that of Silicon Valley Bank — which failed in 2023 — regulators will understandably demand clear explanations of how this model differs from SVB's risky blueprint, says Goss.
"I think it's fair for the regulators to ask why they're not going to be another SVB, and they will be prepared to answer that question," said Goss. "I'm sure they'll note there's some overlap in the business model, and then they'll probably list three or four ways that they're different. I think OCC will be more receptive to those arguments than the FDIC, but I think probably, again, given the current leadership of the FDIC, I think eventually they'll get on board."
The de novo application comes at a time when the Trump administration has asserted greater control over independent regulators —
Experts warn that if agency heads can be removed at will, even the appearance of political influence could impact high-profile charter decisions. In the case of Erebor, whose backers are known for their pro-MAGA orientation, the firm's alignment with the administration could raise questions about preferential treatment, says Baker.
"They're part of what I would call the techno-determinist movement within the tech billionaire set — the philosophy of the two large backers is aligned with a variety of New Right movements, Curtis Yarvin, Peter Thiel, Mark Andriessen … very significant contributors to a variety of right wing causes," Baker said. "The question will be, to what extent are the evident risk management issues in a new bank with this type of ambitious agenda going to be elided due to political pressure?"
While the tone from the top has been broadly pro-crypto, people in the administration have varying views on digital assets, says Goss.
"Just because the views are maybe simpatico with the administration, I don't think necessarily means that there's coordination," Goss said. "There's people that independently have views on the benefits of digital assets and so on and so forth."
Erebor's backers have also hinted at a novel structure that diverges from traditional fractional-reserve banking. The firm is considering a "
Erebor's founders don't need to start a bank for financial reasons and their motivations likely go beyond traditional business goals, Baker says. Like others pursuing novel charters, they may be interested in reshaping elements of banking — potentially exploring narrow banking models, rethinking the fractional reserve model of banking or using stablecoins as a payment tool.
Though the public application doesn't spell out how far they'll go in those areas, prior statements suggest theoretical ambitions. According to New York Post reporting, the group has discussed a conservative balance sheet strategy and floated ideas like one-to-one deposit covenants, where customer funds would remain fully reserved and untouched. The reality of their business model is not yet clear, says Baker.
"It is likely that the business plan they've submitted is more modest and more consistent with digital banking fintechs," said Baker. "I [compare it to]
But Goss said that if the bank intends to accept deposits insured by the FDIC, it's unlikely to operate as a pure narrow bank.
"If they want deposits, then I guess I'd be very surprised if they were going to be a pure narrow bank, because you don't have to accept deposits to be a national bank," said Goss. "You could be a National Bank Trust Company, and you could effectively be a narrow bank, because you would just have all of your assets under custody somewhere — so if you go for FDIC insurance, I think that's inconsistent with a traditional understanding of what a narrow bank is."
