What Makes Erebor, Dubbed the 'Next Silicon Valley Bank', Attractive to SBI and Robinhood?

SBI invests $100 million in Erebor, a U.S. digital bank aiming to serve the 'innovation economy'.

Written by: Nicky, Foresight News

According to an announcement by SBI Holdings on November 3, the company plans to invest $100 million in the digital bank Erebor Bank through its U.S. subsidiary, SBI Holdings USA. Erebor supports stablecoin deposits and withdrawals, and SBI stated it will explore broader cooperation with the bank.

Erebor Bank is a nationally chartered bank headquartered in Columbus, Ohio, holding a national bank charter from the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) insurance.

What Does Erebor Bank Do?

According to public information, Erebor Bank was co-founded in 2025 by Palmer Luckey, Owen Rapaport, Jacob Hirshman, Aaron Pelz, and Trevor Capozza, named after the Lonely Mountain in 'The Hobbit'.

Palmer Luckey is a well-known American entrepreneur and inventor, best known as the founder of the virtual reality (VR) headset Oculus Rift, the original founder of Oculus VR, and the founder of defense technology company Anduril Industries. Notably, he plays a strategic role on the board of Erebor Bank but does not participate in daily operations.

The other co-founders include: Owen Rapaport as CEO, who previously founded the crypto compliance company Aer Compliance; Jacob Hirshman as chairman, who has served as an advisor to Circle and worked at Sullivan & Cromwell; Aaron Pelz as CTO; and Trevor Capozza, also a co-founder, though his specific role is not disclosed in public records.

Palmer Luckey, Image Source: AF Post

Palmer Luckey, the core founder and main supporter of Erebor, has long been a donor to the Republican Party and Trump-related elections. According to OpenSecrets and The Guardian, he has donated approximately $5.9 million to Republican candidates and groups since 2017, has hosted multiple Trump-related fundraising events, and has made significant donations directly to the Trump 47 Committee.

During the 2026 midterm election cycle, Luckey continued to donate to Republican federal candidates and committees. According to analyses by LAist and others, he donated over $350,000 to more than 70 campaigns during this cycle, almost all to Republicans, with total contributions to GOP-related committees exceeding $1 million. In the summer of 2026, he also hosted a 'Keep the Senate' fundraising event related to the National Republican Senatorial Committee.

In October 2026, at an event at Anduril's new shipyard in Maryland, Trump referred to Luckey as 'my friend' and 'a very impressive person'.

Erebor is positioned to serve U.S. 'innovation economy' businesses, focusing on clients in defense, robotics, artificial intelligence, hard tech, energy, advanced manufacturing, and the crypto industry. It offers deposits, loans, payment, and fund management services, while supporting stablecoin deposits and 24-hour blockchain settlements. Unlike trust institutions that only provide custodial services, Erebor holds a full commercial banking license, allowing it to accept FDIC-insured deposits and issue loans.

According to an announcement from Robinhood in October, Erebor received its full OCC national charter and FDIC insurance in February 2026, after which its deposit base grew to over $7 billion. Bloomberg reported on July 2 that the bank's deposits increased from $1.1 billion to $4.05 billion over the past three months, with nearly 400 new clients, and it expects to achieve profitability within the year. Sacra estimates its annualized revenue in July to be approximately $112 million, primarily from hundreds of capital-intensive companies, indicating a high customer value.

Why Did SBI Invest in It?

SBI Holdings is a comprehensive financial group in Japan, established in 1999 as a spin-off from SoftBank, with businesses covering securities, banking, asset management, venture capital, and digital assets.

It has a deep footprint in the crypto space: it invested in Ripple in 2016 and established SBI Ripple Asia, invested in bitFlyer, and set up the licensed exchange SBI VC Trade; in June 2026, it launched Japan's first trust-structured yen stablecoin JPYSC, collaborated with Circle to distribute USDC in Japan, and partnered with Ripple to promote RLUSD; in October 2026, it completed the acquisition of the Japanese exchange Bitbank. Additionally, SBI has invested in Web3 infrastructure projects such as Gauntlet, Morpho, and Elliptic.

For SBI, Erebor's value lies in its dollar channel and stablecoin settlement capabilities in the U.S. market. Erebor supports stablecoin deposits and withdrawals, has a self-built core system that supports blockchain settlements during weekends and non-bank hours, and accepts crypto assets as loan collateral. SBI stated in its announcement that it will explore broader cooperation, indicating that the two may connect on stablecoin inflows and outflows, cross-border settlements, and institutional client services.

SBI is not the only institution optimistic about Erebor. According to an announcement from Robinhood on October 21, Robinhood Ventures Fund I (NYSE: RVI) completed the purchase of $30 million in preferred shares of Erebor on September 17.

RVI is the first fund launched by Robinhood Ventures, listed on the NYSE on March 6, 2026, as a closed-end fund primarily investing in a portfolio of private companies, open to retail investors without a qualified investor threshold or minimum investment amount. RVI President Sarah Pinto stated in the announcement that the banking industry has room for innovation, and Erebor has the potential to become the foundational financial infrastructure needed for the U.S. innovation economy.

In December 2025, Erebor completed a $350 million financing at a valuation of $4.35 billion, led by Lux Capital, with participation from Founders Fund, 8VC, and Haun Ventures. According to Bloomberg on July 2, Erebor is in talks with investors for a new round of financing, targeting a valuation of at least $8 billion, nearly doubling from the end of last year. Its investors also include Andreessen Horowitz and others.

Erebor's differentiation lies in incorporating stablecoins into banking operations rather than just providing cryptocurrency custody. It supports deposits and settlements of major stablecoins such as USDC and USDT, and integrated the Sui network for stablecoin deposits and related services in April 2026. The bank holds a small amount of crypto assets for gas fees and stablecoin wrapping operations, but is not a stablecoin issuer, focusing on deposits, settlements, and related services.

According to The Information on September 16, Erebor attracted crypto clients this year by offering free cash conversions for Circle and Tether stablecoins, but some professional trading firms exploited this policy for arbitrage, causing losses for the bank. Erebor subsequently tightened the related terms.

Erebor's direct competitors include Column, Lead Bank, and Cross River. Among them, Column is a software-native, API-first nationally chartered bank in the U.S., with clients including Mercury, Brex, and Ramp; Lead Bank has acted quickly in the stablecoin space, launching USDC inflows and outflows and cross-border payments; Cross River is a long-established bank serving fintech and crypto companies, with clients including Circle, Coinbase, and Gemini.

Compared to these competitors, Erebor's advantages include its national charter, FDIC insurance, high-touch service model, and clear focus on innovative technology and crypto clients; its disadvantages are its short establishment time and that it is still in the early stages of growth.

According to Bloomberg opinion columnist Paul Davies, Erebor mimics SVB (Silicon Valley Bank) by focusing on a single high-volatility industry, which poses concentration risk. Senator Elizabeth Warren has expressed concerns about Erebor's rapid licensing and its political connections. Industry media generally view it as a signal of the revival of crypto-friendly banks but also caution about the challenges of its early operations, such as Erebor's policy of offering free cash conversions for Circle and Tether stablecoins to attract crypto clients, which was later adjusted due to losses from arbitrage by professional trading firms.

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