US Approves Erebor Bank as First Crypto Charter Under Trump

Key Insights:

• US regulators approved Erebor as the first new national bank of Trump’s term.
• Erebor targets tech startups after gaps left by Silicon Valley Bank’s collapse.
• Bank plans crypto-backed lending and blockchain-based payment rails.

The United States has approved a newly created national bank for the first time during President Donald Trump’s second term. Regulators granted a national bank charter to Erebor Bank, a startup positioned as crypto-friendly and tech-focused.

The approval grants Erebor permission to operate nationwide, as startups still adjust after the collapse of Silicon Valley Bank.

OCC Grants Charter as Erebor Bank Launches with Fresh Capital

The Office of the Comptroller of the Currency approved Erebor Bank’s national charter. Reporting cited people familiar with the matter as the source.

The approval permits the lender to operate as a national bank nationwide. Erebor is launching with about $635 million in capital, and that provides it with a sizable starting base.

The charter marked the first approval for a newly created national bank under Trump’s current term. The decision also comes after increased attention on banking access for technology companies.

Many startups lost a key bank relationship when Silicon Valley Bank failed in 2023. That meltdown caused a drop in credit for venture-backed companies and less flexibility in managing cash.

Erebor’s backers said the market still requires a specialist lender for modern tech businesses. They also say the charter provides credibility with clients who need regulated banking partners. The approval, however, doesn’t eliminate ongoing compliance demands.

Investor Roster Includes Major Venture Firms

Erebor is backed by prominent technology investors like Andreessen Horowitz, Founders Fund, Lux Capital, 8VC, and Elad Gil.

The funding base represents strong venture interest in rebuilding tech banking services. Investors see room for a new model after the market disruptions that followed the collapse of SVB.

Oculus co-creator Palmer Luckey founded the project and will sit on the bank’s board. He won’t operate on a day-to-day basis, according to the report.

This governance structure is responsible for separating strategic oversight from operational leadership. It also lowers the risks of founder-led execution in the regulated environment.

Erebor was given preliminary conditional approval by the OCC in October, the report said. Its application for deposit insurance was approved by the Federal Deposit Insurance Corporation roughly a month later.

Those steps established the final charter decision. The approvals mean the regulators were satisfied with the core requirements for launch readiness.

Erebor Bank Targets Defence Tech, AI, Robotics, and Advanced Manufacturing

Erebor bank is positioning itself as a specialist lender for industries that are reliant on complex assets and long development cycles.

It expects to focus on defense technology, robotics, advanced manufacturing, and artificial intelligence. The target base also contains experiments in manufacturing, such as pharmaceutical production in low-gravity environments.

The bank’s strategy reflects a view that traditional lenders have trouble assessing unconventional collateral. Many startups have valuable assets that do not fit conventional underwriting models.

These assets can be specialized contracts, proprietary hardware, and hard-to-price private securities. Erebor seeks to develop underwriting expertise that is consistent with those realities.

The bank is also planning to fund the purchase of high-performance AI chips. Financing demand has increased due to the increased competition for computing. Erebor’s pitch is to connect sector knowledge and credit decisions.

Crypto-backed Credit and 24/7 Settlement

Erebor plans to incorporate blockchain-based payment rails that enable continuous settlement. That design is different from traditional U.S. banking.

There, many processes are dependent on business hours. Continuous settlement could support clients working around the world and across time zones. It could also minimize delays for firms handling frequent treasury movements.

The bank’s model covers extending credit that is backed by crypto holdings or private securities. That type of approach is aimed at clients who already have digital assets they want capital efficiency with.

It is also reflective of growing interest in regulated methods to utilize crypto as collateral. The structure will require tight controls around risk, particularly around valuation and liquidity.

Erebor’s valuation has also risen rapidly. The bank was valued at around $2 billion in a funding round last year, the report said.

It went on to become a $4 billion company following a $350 million funding round from Lux Capital. The funding indicates investors are anticipating continued demand for banking focused on technology.

The post US Approves Erebor Bank as First Crypto Charter Under Trump appeared first on The Market Periodical.