Switzerland’s Crypto Valley in the canton of Zug is looking to make a “major reset” in its rules following the dismal performance of its sector as of late. One of the key reasons for the tighter tone of the country when it comes to cryptocurrencies was the FTX debacle. Other events that left a dent in the industry were also cited.
The Series of Unfortunate Events
At the present, there are already more than a thousand crypto and blockchain start-up companies that have established their businesses in Switzerland. Most of these have been centered in the Crypto Valley in the canton of Zug.
The companies are primarily driven by the favorable investment climate in the area which is highlighted by its beneficial tax rates, hospitable political environment, and accommodating legal infrastructure. These are well illustrated by the strong support of the region for cryptos wherein it even accepts tax settlements in either Bitcoin or Ethereum.
However, the fallout of FTX in November last year resulted in a chain reaction that totally rocked the crypto landscape. This was followed by an issue with another giant in the industry, Genesis.
Dirk Klee, head of Bitcoin Suisse, admitted in an interview that a lot of bad things happened in the crypto world in 2022. He blamed these events for the dampened sentiments of investors in the crypto market.
Aside from the FTX fiasco, he also recalled the collapse of Terra/Luna, a stablecoin pegged to the US dollar, in May of that same year. Then, the exec made mention of others like the Singapore-based crypto hedge fund Three Arrows Capital and crypto investment platform Celsius to drive his point.
The FTX and Terra/Luna came at a very unfortunate time when crypto assets are tanking in the market and have wiped out around $1.8 trillion of their overall value. Based on the publication of the Bank for International Settlements the industry took over $450 billion hit alone in the Terra/Luna crash and another $200 billion in the aftermath of the FTX debacle.
According to him, the incidents only exposed the weaknesses of most institutions operating in the crypto realm. He noted that the problem lies in the same companies that haven’t been in compliance with regulatory processes yet. He reminded everyone though that the crypto industry is still a relatively “young sector” and is still in great need of being ironed out.
In the analysis of the Bitcoin Suisse boss, the failures of the giants in the crypto industry mostly stemmed from poor management choices coming from centralized financial institutions instead of technological issues. Meanwhile, Mathias Ruch, founder and CEO of CV VC/CV Labs, echoed the same sentiments and added that the chain of events has pushed the sector back by two years.
The crypto market in Switzerland may be in dire need of an overhaul based on the key facts raised by the experts in the field. Although tighter regulations threaten the decentralized nature of cryptos that have defined them over the years, a balance must be met by policymakers in crafting rules that will specially benefit the stakeholders in the industry.