New Bank Erebor Opens to Serve Crypto and Defense Sectors as UnCash Collapses
A new federally chartered bank targeting cryptocurrency firms, defense contractors, and AI startups opened for business on February 8, becoming the first de novo bank approved under the Trump administration's second term—just as a "no KYC" crypto payment service abruptly shut down amid network pressure.
Erebor, named after the fictional mountain fortress in Lord of the Rings, received approval from the Office of the Comptroller of the Currency after submitting its charter application in June 2025. The bank positions itself as filling gaps left by Silicon Valley Bank's 2023 failure, focusing on high-net-worth individuals, businesses in emerging sectors, payment service providers, investment funds, and trading firms.
The timing underscores the volatile regulatory environment facing financial services at the intersection of traditional banking and cryptocurrency. Just days before Erebor's launch, UnCash—a service that allowed users to obtain payment cards without standard identity verification—announced it was shutting down after what it described as coordinated termination by its card issuers.
UnCash blamed Mastercard for the closure, calling the action a "clean, corporate guillotine" in a statement posted last week. The service said 90 percent of its cards operated on Mastercard's network, making the termination "not a minor inconvenience—it's a death sentence." The shutdown came one day after Fintech Business Weekly published an investigation into compliance gaps in certain crypto card programs.
UnCash users will receive refunds and can withdraw funds to external cryptocurrency wallets, according to the company's statement. The service added it was "done pretending we can fight Goliath with a slingshot made of good intentions."
Erebor's approval signals a potential shift in federal banking policy toward emerging technology sectors that have struggled to access traditional banking services. The bank has connections to prominent figures in the current administration's orbit, including Palmer Luckey, founder of defense technology company Anduril, according to industry reports.
For chief financial officers at technology companies, the developments highlight both opportunity and risk. Erebor's entry may provide banking options for firms in sectors that have faced account closures or service denials from traditional banks wary of regulatory scrutiny. However, UnCash's rapid collapse demonstrates how quickly payment infrastructure can evaporate when network operators or regulators intervene.
The contrast between the two events—a regulated bank opening specifically to serve controversial sectors versus an unregulated payment service collapsing—may preview the regulatory approach of the new administration: formal banking channels for legitimate businesses, but continued pressure on services operating in regulatory gray areas.
The question for finance leaders is whether Erebor's model proves sustainable or whether serving high-risk sectors under federal oversight creates its own set of compliance challenges that ultimately limit the bank's ability to operate differently than its predecessors.
Responses (0 )