6.5 C
New York
Sunday, October 17, 2021

Coronavirus sweeps Swiss cryptocurrency paradise – this is its rescue plan

With the end of bank secrecy, Zug set out to be the capital of the crypto industry in Europe. Now 90% of these companies believe they will go bankrupt this year if they don't have an aid package.

Must Read

Escaped child serial killer who drank blood of boys was hunted down by villagers

An escaped self-confessed child serial killer who drank the blood of boys he killed was tracked down...

Teen girls start developing tics shortly after watching TikTok videos of people displaying tics – doctors warn

Since the beginning of the pandemic, teenage girls all around the world have been showing up at...

Some drugs having anti-inflammatory may prevent the worst effects of COVID-19 infection – says study

Covid Vaccines have been shown to reduce COVID-19-related hospitalizations and deaths. However, the scientific community continues to...
Kuldeep Singh
Kuldeep is a Journalist and Writer at Revyuh.com. He writes about topics such as Apps, how to, tips and tricks, social network and covers the latest story from the ground. He stands in front of and behind the camera, creates creative product images and much more. Always ready to review new products. Email: kuldeep (at) revyuh (dot) com

In the last decade, we have seen how countries around the world have tried to articulate large technological hubs that attract millions of euros in investment and jobs. The idea, to create a ‘hub’ that could be baptized as the ‘Silicon Valley’, although it was far from being considered as the great capital of world innovation. In the case of Switzerland, these efforts crystallized in what came to be called Crypto Valley, a kind of private institution, straddling the ‘lobby’ and the professional guild, which was born a few years ago to turn that country into a ‘Mecca of the Blockchain’ to where firms from all over the globe will join to settle there and develop related businesses.

Something that local administrations promoted with a usual bait: a low tax rate as well as favourable regulation. The result was quickly noticed. At the end of last year, there were already 840 companies dedicated to these tasks and they had a workforce of 4,400 people. Among the companies and associations are the Ethereum Foundation, responsible for the main alternative to bitcoin, or Shapeshift, a well-known digital currency exchange house, which settled in the city of Zug, the epicenter of this initiative.

That place, with a strong fishing and livestock tradition, has become a sort of cryptocurrency paradise. Both at the corporate and institutional level. Not surprisingly, a couple of years ago, the Administration created a Blockchain-based identification system for the population.

However, and despite the fact that cryptocurrencies have proven to be a safe haven in times of financial crisis, this project has not been able to avoid the effects of the coronavirus and the consequent uncertainty that the pandemic has generated. Something that can pose a missile in the waterline of this ‘crypto industry’.

A report by the Swiss Blockchain Federation shows how nine out of 10 companies in this sector will not survive – if not with public help – the coronavirus crisis and 79.8% think that if this oxygen balloon does not arrive, in six months will go bankrupt. Virtually all of the respondents (90%) plan to make layoffs in the coming weeks and 60% have already had to make some cut in the workforce.

Rescue for the Crypto Valley

These data, published at the beginning of the month, pushed the Swiss Federal Council, the country’s highest executive body, to draw up a rescue plan for ‘fintech’ and ‘startups’ from all over the territory. The amount of this fund will be 154 million francs (almost 146 million euros) to be distributed among the different cantons. However, this does not seem sufficient to the Zug government, which wants to mobilize a total of 100 million francs (95 million euros) for its territory alone.

Finance officer Heinz Tännler, a member of the Democratic Center Union, is designing another aid package for the Crypto Valley, as he explained to local media and collected by the Bloomberg agency. Half of this mechanism would be borne by the public coffers. About 30 million would be in charge of municipal and cantonal finances, while between 10 and 15 million would come from state aid.

“We want to combine the solution proposed by the federal government with a new vehicle in which private investors can also participate,” Tännler told the ‘Sonntagszeitung‘ newspaper. Private money would take care of half of that life preserver.

The problem is that many of those companies are still in a very tender stage, so a loan could simply be a drag in the medium term depending on conditions. What they propose, basically, is that this aid can be converted into social capital in the case of companies that still do not have sales or these have fallen dramatically due to the COVID-19.

The ‘meta tax haven’

Both Zug and CVA have always been involved in some controversy. Not surprisingly, this canton has been considered a kind of tax haven within another tax haven as it has traditionally been considered Switzerland. A ‘meta tax haven’ considered this way for its very low tax rate, established in the first half of the 20th century to reduce the gap with neighbouring cantons, which has then been maintained over time. In the past, this canton was known for being the refuge in the eighties of Marc Rich, the controversial ‘oil king’ convicted – and pardoned years later by Bill Clinton – for tax crimes in the US as well as for his relations with Iran.

The city, half an hour from Zurich, was also known for the numerous tax deposits it attracted in the 1990s. However, the end of banking secrecy forced her to reconvert and found the idea of Crypto Valley an opportunity to adapt to a new scenario in which greater global financial control would progressively take place. The opposition then issued the classic criticism of these initiatives, stating that it was a very “speculative” project and criticizing the volatility of the sector as well as the potential risk of illicit activities surrounding cryptocurrencies.

- Advertisement -
- Advertisement -

Latest News

- Advertisement -

More Articles Like This

- Advertisement -