Much like Silicon Valley in the United States, the Swiss city of Zug is home to Crypto Valley, a cryptocurrency and blockchain development hub with over 800 blockchain projects based there. Crypto Valley spans from Zug to Lichtenstein and is known for its crypto-favorable regulations, tax laws, and legal stability. It has been called the fastest-growing tech community in all of Europe and CV VC, a crypto investment firm in Switzerland, claims that in the fourth quarter of 2018 the number of blockchain companies there grew by 20 percent.
While the growth over the last few years has been immense, many of the firms in Crypto Valley appear to be struggling due to the economic fallout related to the global COVID-19 pandemic. The president of the Crypto Valley Association (CVA), Daniel Haudenschild, says that the coronavirus pandemic has had a major impact on the crypto ecosystem.
According to Crypto Coin Growth, almost “80 percent of 203 firms surveyed by the Swiss Blockchain Federation recently warned of imminent bankruptcy. Only half of the 50 biggest companies in Crypto Valley expect to last a year in business.” Investors are no longer as aggressive as they have been previously, as they are afraid of an economic downturn and financial loss in technology investments. The risk can seem too great in today’s economic landscape, despite how anything crypto-related has become one of the hottest areas for investment and entrepreneurship over the last 5-7 years.
Haudenschild believes the pandemic will have long-lasting effects for the crypto industry, in addition to other fields, saying, “The world is going to take a critical re-think on just about everything. There are already some obvious challenges. […] This re-think will extend through to supply chain, manufacturing, sourcing, and just about every industry sector. Ultimately crypto business and blockchain will be more important in the future, not less.”
Directly due to the financial fallout of COVID-19, in April, Crypto Valley asked the Swiss federal government for a 100 million Swiss franc (102.7 million USD) fund to help bail out companies. At the end of April, the Swiss government announced that it would provide a fund of 154 million francs (159.85 million USD) in credit guarantees for startups, but Cantonal Finance Director, Heinz Taennler believes it will not be enough and that most startups do not make enough money to qualify for bank loans under the Swiss government’s COVID-19 aid package. Nonetheless, marketing firm Relevance House co-founder German Ramirez “predicts long-term success for Swiss crypto startups as blockchain innovations are expected to disrupt traditional financial infrastructures after the pandemic.”
Recessions and global issues historically have difficult and painful economic consequences when revenue slows, and investors pull back. Though experts have high hopes for the eventual return of the blockchain and crypto companies, right now, the struggle continues.