Possible end of the crypto boom

The number of start-ups in Central Switzerland decreased slightly in 2019. The decline was most pronounced in the Canton of Zug.

"The Swiss start-up scene is developing enormously," is the key message of a recently published analysis by the Institute for Young Enterprises (IFJ = Institut für Jungunternehmen). According to this analysis, 2019 is the strongest year since the Swiss Commercial Register was founded. A total of 44,482 new companies were registered, an increase of 3% compared to the previous year 2018. The same conclusion comes from a survey of the company start-up platform, Startups.ch.

While most regions saw more start-ups in 2019 than in the previous year, Central Switzerland saw a 2% drop in start-ups (see table). The trigger is the Canton of Zug. While the internationally popular business location stood out with growth rates of 16% and 20 % in previous years, the number of start-ups declined by 9% last year. Obwalden also saw a significant decline, but this was due to numerical fluctuations as a result to the small number of start-ups there.

For Michele Blasucci, CEO of Startups.ch, the decline in the number of start-ups in Zug shows that "the gold digger mentality is over for cryptocurrencies". "The international scene thought that Switzerland was the leader in this area, and various foundations were set up in the ‘Crypto Valley’ of Zug." But, following the first negative examples, such as the one at the Envion company, made it quickly clear that Switzerland was actually no further ahead than other countries, and the legal requirements for cryptocurrencies have not yet been clarified. “We also take on trustee duties at Startups.ch,” says Blasucci. And customers from the crypto sector sometimes have a lot of money lying idle because they don’t know what to do with it, due to the unclear development. The possible end of the boom would be felt above all by Zug.

Fewer companies were founded in Zug.

Although he sees the flattening of the crypto boom as the main reason for the decline in new registrations in Zug, Simon May of the IFJ also sees other reasons. Zug is internationally oriented, and would therefore also feel uncertainties in the global economy more quickly. “Start-up clusters in the technology sector have also developed in other regions, for example in the Vaud region around universities. The blockchain sector no longer has to be just Zug.” And, in particular, taxes don’t play the most important role in a start-up. His advice is thereby not to over-interpret the numbers. "Because if you look at how many companies are founded per thousand inhabitants, Zug is in second place in Switzerland with 19.08, and Central Switzerland as a region is also in this good position, with 7.59."

The head of Zug’s Economics department, Silvia Thalmann-Gut (CVP), also sees no cause for concern. "With the exception of new registrations of companies from the blockchain sector, we have a very stable and positive development." It was always expected that normalisation would occur in the canton of Zug after the boom, and she remains confident about the future of Crypto Valley. "When I talk to exponents from the crypto sector, they continue to see great opportunities for their industry." It’s important to understand this technology and "not to block it". But a reliable legal framework must also be developed, of course.