Palmer Luckey argues that fintechs relying on partner banks are vulnerable to a 'censorship chain.' A decision to de-platform a customer can be forced upon them by their partner's bank or payment processor. By securing its own charter, Erebor ensures the buck stops with them, preventing external parties from dictating its business decisions.
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Erebor, a new bank from Palmer Luckey and Joe Lonsdale, achieved the fastest approval in 25 years by flipping the traditional growth model. Instead of aggressive lending, they plan to lend only 50% of deposits (vs. the typical 90%), signaling to regulators that stability, not risk, is their priority.
Palmer Luckey argues that relying on another bank's charter forces you to appease their risk tolerance and political pressures. Owning the charter means "the buck stops with you," ensuring you control your own de-banking and censorship decisions rather than having them dictated by upstream partners.
Unlike banks that react to fraud, Palmer Luckey's Erebor is proactively partnering with intelligence agencies from its inception. The goal is to design a system where fraud is nearly impossible, creating a moat that attracts legitimate, high-value clients while inherently repelling bad actors who prefer less scrutiny.
Palmer Luckey's bank, Erebor, takes the unusual position of complying only with U.S. law, explicitly stating it "will not comply with spurious rulings from people who have no real jurisdiction." This contrasts with global banks beholden to multiple markets and is a key differentiator for companies aligned with U.S. interests.
Contrary to being another SVB, Palmer Luckey's new bank Erebor is designed as its opposite. It targets tech and defense customers with a hyper-conservative model focused on high deposit-to-loan ratios, prioritizing capital safety over yield for its startup clients.
While AI can write code, Affirm CEO Max Levchin states it can't replicate the true moats of a fintech company. These include deep capital markets relationships, a full suite of money transmitter licenses (which take ~18 months to acquire), and years of building consumer trust.
Unlike other tech verticals, fintech platforms cannot claim neutrality and abdicate responsibility for risk. Providing robust consumer protections, like the chargeback process for credit cards, is essential for building the user trust required for mass adoption. Without that trust, there is no incentive for consumers to use the product.
The US banking system is technologically behind countries in Eastern Europe, Asia, and Latin America. This inefficiency stems from a protected regulatory environment that fosters a status quo. In contrast, markets like the UK have implemented fintech-friendly charters, enabling innovators like Revolut to thrive.
Instead of reacting to court orders, Palmer Luckey's Erebor bank preemptively works with intelligence services. This strategy aims to create a fraud-resistant platform, attracting legitimate clients and deterring malicious actors from the start, turning compliance into a competitive advantage.
The primary strategic reason for a large platform to issue its own stablecoin isn't just yield, but control. Relying on an external stablecoin creates platform dependency, making the business vulnerable to changes in fees or strategy, much like Zynga's reliance on the Facebook platform.
