Hundreds of crypto startups have been left stranded after Switzerland’s government refused to grant the local blockchain industry a bailout of CHF 100 million, or about $103 million.
Zug finance director Heinz Taennler had been in talks with the central government for setting up an emergency fund to support cryptocurrency firms devastated by the coronavirus in Switzerland’s “crypto valley” near Zurich. The rejected fund would have consisted of private investments, contributions from local governments, and federal guarantees, local media reported.
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While blockchain firms are fighting for their survival as private investors pull out funding, the Zug local government has blocked potential emergency funding for the once-flourishing industry. The talks that were started in April broke down last week, putting at risk more than 160 firms that warned of imminent bankruptcy when recently surveyed by the Swiss Blockchain Federation.
The rejection comes as the Swiss government announced a comprehensive package of measures to cushion the economic impact of the coronavirus pandemic. Specifically, it will provide 154 million francs in credit guarantees for FinTech startups that have particular financial worries as the pandemic will cause an expected drop in private funding.
Bridging credit facilities should provide companies in the small Swiss canton of Zug with sufficient liquidity to cover their current overheads despite turnover reductions associated with the new coronavirus.
Switzerland was among several countries that are actively adjusting and creating legislation to welcome blockchain projects. Swiss authorities were also eager to maintain a leading role for Switzerland in the cryptocurrency space while playing catch-up in its rapidly changing landscape.
In 2018, FINMA issued the country’s first asset management license to a cryptocurrency investment fund, allowing Zug-headquartered company Crypto Fund to offer services to institutional clients. Also in 2019, FX firm Dukascopy has become the first Swiss bank to win approval for an ICO by Switzerland’s financial market supervisor.
Several other competitors have also been queuing up at the regulator’s door to get approval to offer their services in the country. Under FINMA’s new regulations, crypto-asset companies can now apply for licenses to handle as much as 100 million Swiss francs ($100 million) in public deposits.