Switzerland’s government has rejected a 100 million franc ($103 million) bailout for local cryptocurrency companies battered by the coronavirus economy, local media reported.
Zug finance director Heinz Taennler requested the special funding package in April. He planned to issue out loans to startups, which could be converted into shares.
The central government had already unveiled a $158.6 million credit facility for all fintech startups, but Taennler felt that won’t be enough for the cryptocurrency sector’s ambitious financing needs.
Zug is the heartbeat of Switzerland’s famed crypto industry, commonly known as the “Crypto Valley.”
Now, members of the Zug local government last week turned down Taennler’s funding request, the only such request to be rejected from over 24 different applications for coronavirus emergency funding, according to a report by local newspaper Tages-Anzeiger.
The majority of the government officials were reportedly not too enthused about the future of the crypto industry.
However, the Zug finance director announced a loan facility of about $15.4 million on May 25, which is now expected to provide temporary relief to emerging businesses in Crypto Valley. The report said more than 66% of cryptocurrency and blockchain companies that applied for broader central government loan guarantees failed to get them.
“Taennler wanted to help blockchain start-ups shaken by the corona crisis with a sovereign wealth fund. But his government colleagues reject this,” said the newspaper report.
The once-flourishing Swiss cryptocurrency industry is struggling to survive following the withdrawal of private equity investors.
About 80% 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.
While startups are generally threatened by the Covid-19 impact on the economy, Cypto Valley’s loss of venture capital constitutes an underlying condition.
A mid-2019 analysis of the 50 top companies valued them at $40 billion, which was two times their value at the beginning of the year. The report also listed six unicorns. As a whole, the “Crypto Valley” had more than 800 companies with over 4,000 employees.
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