Crypto crash fails to deliver death blow to Swiss ambitions

The crypto sector appears to be suffering an existential crisis, shedding jobs, client funds and credibility. Switzerland looks to have escaped with a glancing blow – if industry data is anything to go by.

The collapse of the Terra stablecoin and the FTX crypto exchange last year sent negative ripples across the globe.

Big name crypto firms such as the Coinbase and Huobi exchanges, Silvergate bank and Genesis are laying off large chunks of staff. That’s to avoid the same fate as the bankrupt FTX, Three Arrows Capital and Voyager.

Switzerland, as the self-styled ‘Crypto Nation’, hasn’t seen anything so spectacular, according to the latest research by Zug-based venture capital company CV VC.

Its ‘Top 50’ report says 183 blockchain-related companies went bust last year but were replaced by 190 start-ups or branches of foreign firms setting up in Switzerland. None of the big names have announced much adverse impact from the current volatility.

The most prominent Swiss firms going under last year were the nascent FTX Europe and Covario, which was set up to help companies manage crypto assets. The Swiss branch of UK-based crypto lender company Nexo is also under the microscope after the company’s Bulgarian offices were searched by police in a money laundering investigation – which the company refutes.

This means Crypto Valley still has roughly the same number of blockchain companies from 2021 (currently 1,135) while headcount has declined just 4% to 5,766 employees.

The Swiss authorities have gone to some lengths to dissuade flaky or corrupt companies from setting up here. FTX Europe tried last summer to buy out the Swiss Neue Privat Bank but was knocked back by the financial regulator that was concerned about the lack of regulatory oversight for the group as a whole.

Companies that were already well-established in Switzerland appeared to fare the best last year. The valuation of the top 24 firms increased 55% to $9.7 billion despite the rapid fall in cryptocurrency prices.

Around this time last year, Switzerland’s two crypto banks, SEBA and Sygnum announced a combined $200 million capital injection from investors. But the biggest gainers appear to have been 21Shares, which issues crypto-backed exchange traded certificates, and Gnosis Safe, which manages Ethereum-based digital assets. Both were valued at above $1 billion, according to the Top 50 report.

This is all good news for a country that aspires to be one of the most credible venues for the blockchain sector.

But the industry is still small and its growth stalled last year. Only time will tell if Crypto Nation can weather the storm and develop an industry that can compare with the vaunted financial, pharmaceutical and engineering sectors.