The coronacrisis is threatening to kill off the fintech ecosystem in the Zug region. Four out of five Blockchain startups are about to go bankrupt, a study shows.

Crypto Valley is in a deep crisis: Blockchain and crypto-startups are releasing staff and face bankruptcy. Most of the young companies don’t stand a chance of getting one of the government’s emergency loans.

These are the findings of a survey by the Swiss Blockchain Federation conducted among 203 companies in the Crypto Valley around Zug. The findings were published by the «Crypto Valley Journal».

No Chance for State Aid

The fintech region around the central Swiss city of Zug is a global leader for the Blockchain industry, with 840 companies registered at the end of last year. They employed some 4,400 members of staff.

The coronavirus pandemic is threatening to kill off a boom in an industry that previously has weathered many storms, including the wide fluctuations of the cryptocurrencies. The survey findings are alarming: four out of five firms said that they will probably become insolvent over the course of the next six months.

Nine out of ten companies added that they won’t survive the coronacrisis without state aid. Almost 6 out of 10 firms have already laid off personnel as a consequence of the crisis and more than 90 percent believe that they will have to do so in future.

Emergency Loans Difficult to Obtain

A majority of startups have tried to get an emergency loan pledged by the state, but only a third of their applications were successful (only about half of the Blockchain companies participating in the survey answered this question).

The picture that emerges from the answers confirms the sentiment voiced: startups are finding it particularly tough to get a loan, and the coronacrisis hasn’t made live any easier for new firms. One respondent said that loans were approved on the basis of revenue and wages, but startups had very low such figures to show for and therefore would, if at all, receive exceedingly small loans.

Others in the Crypto Valley have refrained from asking for help because they knew about the difficulties in getting a loan.

Next Stop: Death Valley?

The Crypto Valley feels neglected by the state. One respondent said that the pride politicians had voiced over the emerging fintech cluster ought to be turned into something more tangible – help. Many politicians in the past had visited the region and its firms – and once even all 200 Swiss ambassadors paid a visit: «Now we need solidarity and support,» said one person responding to the survey.

The concern about liquidity has turned into real fear about the future: «If nothing happens, in half year, Crypto Valley will be Death Valley,» one entrepreneur warned.