Blockchain start-up growth bucks Swiss trend

Crypto Valley has attracted business delegations from many countries, such as South Korea, who watch a presentation on blockchain companies. © KEYSTONE / URS FLUEELER

The number of blockchain companies in Switzerland grew 20% to reach 750 in the last three months of 2018. But the market capitalisation of such firms, measured by the dollar exchange rate of tokens in circulation, more than halved as crypto-assets nose-dived in value.

The uptick in company registrations in the blockchain industry bucked the trend of slightly fewer start-ups setting up shop across all sectors in Switzerland last year.

Switzerland has built a reputation as a global hub for the blockchain industry. Much activity is based around the Crypto Valley of canton Zug and in the Zurich financial centre. But the figuresExternal link from business incubator CV VC and PwC Strategy& also cover Geneva, Ticino and neighbouring principality Liechtenstein.

More than 3,300 people are employed in the blockchain scene in Switzerland and Liechtenstein, most of them in Zug or Zurich regions.

A closer look at the figures shows that the 750 companies includes support services such as consultancy and legal, academia and research plus media/events players. Roughly 60% of the total number of firms can be called pure blockchain start-ups.

Crypto Winter

They typically raise funds by selling digital tokens to the general public. In most cases these tokens simply allow the user to operate the blockchain platform, but a new generation has started to offer stakes in company equity and dividends.

The study authors measure the value of blockchain companies by calculating the combined worth of all tokens that they have issued.

The value of crypto tokens plummeted at the start of 2018, steadied in the summer but experienced another dip later in the year – the so-called ‘crypto winter’. As a result, the valuation of the top 50 blockchain companies in Switzerland plunged from $44 billion (CHF44 billion) in September to $20 billion at the end of last year, according to the study.

Three of the four ‘unicorn’ companies (with a market capitalization of at least $1 billion) are foundations set up in Switzerland to house and spend the money contributed by investors. The fourth, Chinese cryptocurrency hardware firm Bitmain, has a small office in Zurich, but has been cutting jobs and closing down operations in recent weeks.

Daniel Diemers of PwC Strategy& is encouraged by the continued growth in the number of start-ups. “This high dynamic in the middle of the crypto winter is very positive. It shows that the appeal of Switzerland as one of the world’s most attractive locations for blockchain startups remains unbroken,” he said in statement.