Erebor, the financial services company backed by billionaire Peter Thiel, has received regulatory approval to launch operations in the United States. This could help fill the void left by the Silicon Valley bank failure in 2023.
According to a report in the Financial Times on Wednesday, Erebor has secured a preliminary banking license, but it still needs to clear several compliance and security hurdles before it can begin operations, a process that could take several months.
The approval was confirmed by the Office of the Comptroller of the Currency (OCC), with Director Jonathan V. Gould stating that “digital asset activity is permissible.” […] If done in a safe and sound manner, it can enter the federal banking system. ”
Erebor is positioning itself as a lender to the so-called innovation economy, focusing on businesses in areas such as cryptocurrencies, artificial intelligence, and advanced technology.
A source close to the company told the Financial Times: “We want to be a stable, low-risk, reliable bank that conducts normal banking operations without ruining everyone with unreasonable risks.”
Erebor aims to become a key source of funding for early-stage startups struggling to access traditional capital markets amid increased regulatory scrutiny, according to previous reports.
Much of this caution followed the U.S. regional banking turmoil in March 2023, when Silicon Valley Bank, Silver Gate Bank, Signature Bank, and First Republic Bank all failed or were acquired. Rising interest rates have also made it difficult for businesses to obtain financing.
Related: Peter Thiel vs. Michael Saylor: Cryptocurrency bet or bubble?
Regulatory changes encourage expansion of crypto companies
The approval comes amid growing regulatory momentum in the United States, with President Donald Trump signing a major stablecoin bill into law and Congress considering additional legislation regarding crypto market structure and restrictions on central bank digital currencies (CBDCs).
Several crypto companies are seizing the opportunity to seek regulatory approval for expansion.
Cryptocurrency exchange Coinbase has applied for National Trust Company status from the OCC, joining several other digital asset companies seeking similar licenses. Coinbase has said it has no intention of becoming a bank, but its charter would allow it to expand into areas such as payments and custodial services.
Circle, the issuer of the USDC stablecoin, has also applied to establish a national trust bank, and Ripple Labs has also applied for a similar license.
Nevertheless, the move is not welcomed by everyone. A trade group for U.S. banks and credit unions has asked the OCC to delay granting banking charters to crypto companies, citing “serious policy and process concerns.”
Caitlin Long, founder of Custody Bank, pushed back against such opposition, noting that the issue would likely be fought in court.
Long argued that the question of whether the trust charter acts as a de facto bank charter, allowing financial institutions to make loans with a fraction of the capital required for a full-service bank and obtain a master account at a Federal Reserve bank, is “very likely to be litigated.”
Related: Bank lobbies are ‘panic’ about high-yielding stablecoins — New York University professor