Crypto Valley in Switzerland Awaits “Reset”

Crypto Valley, which Switzerland established for blockchain startups in the Canton of Zug inspired by Silicon Valley, has come to expect a “big reset” after the massive collapse of the cryptocurrency exchange FTX.

In recent years, Switzerland has been flooded with cryptocurrency and blockchain start-ups due to its favorable tax rates and rules, as well as its friendly approach. More than 1,000 such companies have opened offices in the wealthy Alpine country, most of them south of Zurich, in the canton of Zug, which even accepts Bitcoin and Ether tax payments. But the bankruptcy of FTX, once the world’s leading cryptocurrency exchange, last November, and the subsequent bankruptcy of crypto lender Genesis, thwarted the frenzied enthusiasm that has long characterized the industry.

“A lot of things happened in 2022,” Dirk Klee, head of Bitcoin Suisse, told AFP, pointing to the collapse of Terra/Luna, the liquidation of Three Arrows Capital, and the collapse of cryptocurrency investment platform Celsius, alongside FTX. “These developments have revealed the weaknesses of some institutions that do not follow regulatory processes yet,” Klee said, emphasizing that the industry is “still young”.

According to Bank for International Settlements, nearly $450 billion evaporated in the market turmoil that followed the Terra/Luna collapse, while another $200 billion was lost after FTX went bankrupt. Mathias Ruch, founder and chairman of CV VC, a fund focused on blockchain startups, said that the collapse of FTX will set the industry back at least a year or two.

According to the CV VC survey, there were 1,135 cryptocurrency and blockchain companies in Switzerland and Liechtenstein last year, up 0.6 percent compared to 2021. But at the same time, the number of so-called “unicorns” valued at over $1 billion has dropped from 14 a year ago to nine in 2022. Employment in the sector decreased by four percent and fell below 6,000. Crypto Valley official Jerome Bailly warned that while crypto firm Taurus managed to secure funding from leading institutions like Credit Suisse and Deutsche Bank last month, smaller start-ups may have more difficulty “getting through this difficult phase”.

Both Bailly and Ruch compared industry turmoil to the bursting of the dot-com bubble in 2000. However, suggesting that this may not be a bad thing for the industry, Ruch pointed out that technology giants such as Google and Amazon emerged from the ashes of dot-com and said, “I think the opportunities are huge.” said