June saw a who’s who of corporate ventures submit bank charter applications to the Office of the Comptroller of the Currency, including Nissan (filing for Industrial Loan Company status); stablecoin operators Circle, Ripple, BitGo, and Protego; and paytech stalwart Wise. Some of these applications are clear attempts to gain direct access to federal payments rails — but perhaps no application has invited as much conjecture as that for “Erebor Bank.”
Backed by — among others — Anduril founder Palmer Luckey and Palantir founders Peter Thiel (Founders Fund) and Joe Lonsdale (8VC), Erebor aims to provide business-banking services to frontier-tech outfits as well as UHNWI and HNWI clients working in that space. In the public sections of its OCC application, it also hopes to become “the most regulated entity conducting and facilitating stablecoin transactions” and offer business-banking products powered by stablecoins, according to its charter application. In other words: Think Brex meets Circle meets SVB, but backed by some of President Donald Trump’s most vocal allies in Silicon Valley.
Though the uptick in OCC applications has some precedent, Erebor, as a foray into banking from business leaders with strong commercial ties to defense and surveillance, does not. (Unless you count, say, Navy Federal Credit Union.) Banking regulations call for strict boundaries between commerce and banking outside ILC charters; Erebor didn’t apply to be an ILC, and doesn’t intend to form a holding company, the establishment of which would cause Erebor to fall more strictly under the purview of the Bank Holding Company Act. In Erebor’s case, insufficient controls between the bank and its backers could plausibly result in attempts to curry favor with its investors to secure capital from Erebor, preferential banking terms for their clients or allied VCs’ portcos, development of Palantir-esque tech for underwriting, and other potential conflicts of interest.
If Erebor’s application is provisionally accepted by the OCC, the Federal Reserve may determine the organizers have insufficient controls in place to uphold a “church” and “state” between the bank and the commercial ventures of its backers. The transparent intention to center stablecoins might also cause the OCC to balk at the charter application. We’ll be tracking how regulators digest Erebor’s application. If it sails through without stringent scrutiny or stipulations, it suggests the ongoing independence of banking regulators may be eroded, not just reasonably reconfigured to bring fintech and other technology ventures into the bank-reg fold.
The Editors
