Crypto Bank Backed By Trump Ally Receives Green Light From US Regulators

A new crypto bank has emerged in the form of Erebor, a firm backed by a group of tech billionaires, including Peter Thiel, a figure with connections to President Donald Trump’s administration. Having received regulatory approval to launch, the bank is seeking to address the gap left by the collapse of Silicon Valley Bank (SVB). 

Erebor Receives Preliminary Approval

According to its banking charter application, Erebor intends to serve businesses within the US “innovation economy,” particularly tech companies concentrated on cryptocurrencies, artificial intelligence (AI), defense, and manufacturing. 

A source close to Erebor told the Financial Times that the bank’s commitment to being a stable and reliable institution, stating, “We want to be a stable, low-risk, reliable bank doing normal banking things without screwing everyone over with undue risk.”

Erebor was granted “preliminary and conditional” approval by regulators on Wednesday, just four months after submitting its application for a national bank charter in June. 

This approval reflects the administration’s initiative to lower regulatory barriers and encourage new entrants in the banking sector, particularly those focused on crypto, as part of the President’s vision to make America the crypto capital of the world. 

OCC’s Support For Crypto Banking Institutions

Despite the bank’s ties to the political landscape in the US, a representative clarified that there was “no special treatment” from the Trump administration during the approvals process.

Adam Cohen, a partner at the law firm Skadden who submitted Erebor’s bank charter application, recently transitioned to the Office of the Comptroller of the Currency (OCC) as chief counsel to OCC head Jonathan Gould. 

In a statement on Wednesday, Gould noted that Erebor was the first new bank to receive preliminary conditional approval since his appointment, reinforcing that the OCC under his leadership is willing to support banks engaging in crypto activities.

Erebor is backed by $275 million in capital, with the majority held as regulatory capital and not intended for immediate operations. The founders plan to seek additional funding in the future to expedite expansion. 

The bank will be headquartered in Columbus, Ohio, with a secondary office in New York, but it will provide digital-only customer service, marketing its offerings through a smartphone app and website.

According to the Financial Times, Erebor plans to incorporate stablecoins into its operations, aligning with the Trump administration’s recent reversal of rules that limited banks from engaging in stablecoin transactions. 

A source close to Erebor indicated that the bank’s rapid approval reflects its “extremely conservative business plan,” emphasizing that it would not operate as a “wacky, techno crypto bank.”

However, the approval has drawn criticism, particularly from Senator Elizabeth Warren, the leading Democrat on the Senate Banking Committee. She described Erebor as a “risky venture that could set up another bailout funded by American taxpayers.” 

Erebor will be led by CEO Owen Rapaport, co-founder of digital assets software company Aer Compliance, and Chief Strategy Officer Jacob Hirshman, who previously served as an advisor at crypto firm Circle. 

Mike Hagedorn, formerly a senior executive vice president at New Jersey-based Valley National Bank, will serve as the bank’s president.

Featured image from DALL-E, chart from TradingView.com