Erebor, the crypto bank built to survive a run, hits $7B in deposits but is losing money

Erebor, a U.S. national bank built for tech and crypto clients, has gathered more than $7 billion in deposits and 500 customers since launch, but it has lent out just $77.8 million and posted a $16.3 million loss, the Financial Times reported.

The bank is keeping most of its money in cash, a deliberate break from Silvergate, which lost 68% of its crypto deposits in a single quarter before collapsing.

Crypto banking faces the lessons of Silvergate

Erebor’s conservative strategy becomes clearer when compared with Silvergate Bank, which became one of the most prominent casualties of the previous crypto-market downturn.

Silvergate had developed a business model heavily dependent on digital-asset customers. According to U.S. banking regulators, the bank experienced a dramatic withdrawal of deposits during the fourth quarter of 2022.

Deposits associated with crypto customers fell from roughly $11.9 billion to $3.8 billion, representing a 68% decline. The bank subsequently sold debt securities to meet withdrawal demands, recording substantial losses in the process.

Customers operating in cryptocurrency markets may move substantial balances quickly, particularly during periods of market stress.

Erebor appears to be approaching that risk differently. By keeping a significant portion of its balance sheet liquid, the bank is positioning itself to meet withdrawals without relying as heavily on forced asset sales.

However, the strategy comes with a cost. The report said Erebor recorded a $16.3 million loss, while its return on assets was negative 1.03% and its net interest margin stood at 0.71%. The figures underline the tension between maintaining a highly liquid balance sheet and generating sufficient earnings.

The bank’s approach is also shaped by regulatory requirements. The Office of the Comptroller of the Currency (OCC) imposed a condition requiring Erebor to maintain a minimum Tier 1 leverage ratio of 12% during its first three years. Its reported second-quarter ratio stood considerably above that threshold at 38.81%.

For crypto banking investors, that unusually strong liquidity position may reduce some near-term balance-sheet risks, although it also limits the amount of income the institution can generate through lending.

Crypto banking moves toward 24-hour digital settlement

Erebor’s ambitions extend beyond simply holding deposits for cryptocurrency businesses. Its regulatory framework permits limited crypto holdings for blockchain network transaction fees, while its broader plans involve blockchain-based settlement and around-the-clock payments.

Stablecoins are already becoming a significant part of that ecosystem. The Bank for International Settlements estimated that stablecoin market capitalization reached approximately $320 billion at the end of May 2026.

The BIS has also highlighted potential implications for bank funding, liquidity and demand for dollar-denominated assets as stablecoin adoption expands.

The importance of stablecoins lies partly in their ability to facilitate transactions outside traditional banking hours.

A bank capable of combining regulated deposits with blockchain-based settlement could potentially provide infrastructure for businesses that require continuous access to dollar liquidity.

However, stablecoin growth does not eliminate the underlying risks. The BIS noted that stablecoin activity remains relatively small compared with the broader banking deposit system, despite the rapid expansion of the sector.

Asia’s growth raises the stakes for crypto banking

The potential market for crypto banking is not limited to the United States. Data cited by the OECD shows that blockchain-based crypto-asset transactions in Asia increased 69% year over year through June 2025, representing the strongest regional growth rate reported in its analysis.

Yet the bank’s current position remains relatively conservative. Its deposit base has grown rapidly, while lending has remained limited and liquidity has taken priority.

The central issue for crypto banking is therefore not simply how quickly deposits grow. It is whether institutions serving technology and digital-asset customers can maintain sufficient liquidity when markets become volatile while also generating enough revenue to remain profitable.

Erebor has entered that test with a much larger liquidity cushion than the banks that previously struggled with crypto-related deposit runs.

Whether that strategy remains effective as the institution expands will depend on how quickly its deposits, lending operations, payment infrastructure and digital-asset activities develop.