Switzerland rejects Crypto Valley’s COVID-19 relief request

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Crypto Valley’s blockchain startups will not be getting a piece of the Swiss government’s COVID-19 relief after a request submitted to the Canton of Zug was rejected

Heinz Tännler, Zug’s finance director, applied for a CHF100 million ($103 million) relief package for the blockchain industry in April. With the coronavirus pandemic having a catastrophic effect on most of the local blockchain firms, Tännler argued that they too deserved a stimulus package like the other fintech startups.

His proposal has been rejected by the Zug government council, according to a report by local German-language newspaper Tages-Anzeiger. The report stated that out of a dozen sectors which requested for relief, blockchain was the only one whose request was denied.

The news deals a major blow to the industry. With COVID-19 bringing many economies to a standstill, Switzerland hasn’t been spared, and Crypto Valley’s startups have been among the worst hit. A report released a month ago revealed that 80% of blockchain startups in Zug were likely to go bankrupt in six months.

The report by the Swiss Blockchain Federation further claimed that close to 60% of the startups had to dismiss their employees. For those that applied for COVID-19 relief, only about 30% were granted.

And while blockchain startups have been denied the relief, other fintech startups have been catered to, with the Swiss federal government issuing a $159 million relief package for this sector.

Crypto Valley’s startups’ viable option now is applying for a loan from a commercial bank, with the federal government covering 65% of the loan as the Canton of Zug covers the other 35%. The Canton will be tasked with deciding who qualifies for the loan and who doesn’t. According to its announcement, it will prioritize ‘sustainable startups’, a vague description that gives the Canton enough leeway to act unchecked.

The loan is a band-aid solution for the startups, however. While it will offer an immediate solution to the cash crunch, these startups will find themselves in similar positions when the banks start collecting.

Crypto Valley’s startups aren’t the only ones feeling the effect of the pandemic on their coffers. Globally, 74% of startups have had to terminate some of their full-time employees, a report released last month showed. 41% of the startups have only enough to run for three months, the report by Startup Genome further showed.