Switzerland’s Crypto valley appears to be in dire financial strains, as the government recently rejected a six-figure bailout proposal for the region. Tages-Anzeiger, a local news source, confirmed on Monday that the government had denied a bailout proposal from the Canton of Zug. The bailout, which worked to the tune of 100 million Swiss francs (about $103 million), would have helped to keep blockchain firms in Zug afloat during the pandemic.
A COVID-19-Inspired Market Downturn
The reports of the bailout proposal first broke out late last month. At the time, Bloomberg reported that Cantonal Finance Director Heinz Taennler called for contributions from local governments, private institutions, and the Swiss federal government in the endeavor.
Taennler said to the news medium, “Of the biggest 50 companies operating in the region, only half said in a survey that they would make it through the next 12 months under current conditions.”
While Zug has become famed for being friendly to blockchain and crypto firms, progressive legislation weren’t enough to keep them away from the effects of the coronavirus. With most companies having to cease operations, profits are dwindling by the day, and private investors are also pulling funds.
Early last month, the Swiss Blockchain Federation sent out a newsletter that outlined some of the more prominent effects of the pandemic. In the newsletter, the federation gave the result of a survey in which representatives from 203 crypto valley firms answered questions on how they believed the pandemic would affect them.
As it showed, 80 percent of these firms don’t expect to come out of this pandemic healthy if they don’t get an injection of funds from somewhere. At the same time, 56.9 percent of the firms confirmed that they had already conducted sweeping layoffs, while 90.7 percent of those that hadn’t said that they expected to lay off workers before the crisis blows over.
A $15 Million Fund is the Last Resort
Speaking with industry news source Cointelegraph, Crypto Valley Association President Daniel Haudenschild added:
“There will be a twofold effect. The first is that businesses will have to find a way to survive. Given that many were just emerging from the effects of a long crypto winter, this double punch will be hard for many to emerge from. The second effect will be that everyone is being forced to go digital.”
Sadly, the $103 million bailout won’t be possible. Tages-Anzeiger also explained that the fund was one of about 24 COVID-19-related bailout applications that the federal government has rejected so far.
However, there’s a bit of hope on the horizon. The Canton of Zug announced a 15 million Swiss franc loan ($15.4 million) earlier this week, which should keep the companies on for a while. According to the terms of the loan, Crypto Valley firms will be able to apply for loans from any bank. The loans will get cover, with 35 percent coming from Canton and 65 percent coming from the federal government.
Applications have started as of today, and they will run up to August 31 via the government’s dedicated platform. The government, in collaboration with external experts, will determine successful applicants.