The cryptocurrency firm Lykke is one of the longest-established Swiss blockchain companies. But it has recently run into financial difficulties. What’s going on and what does that mean for the sector? Founder and CEO Richard Olsen gave me his take on the situation.
First the background. Lykke was established in Switzerland in 2015. It aims to create a decentralised digital market for tokenised assets. This means turning the likes of company shares into digital code that can be traded on the blockchain. It says this will result in faster transactions, lower costs and better access to small investors.
But this is proving no easy task. An article from the financial news platform Insideparadeplatz speaks of the company shedding employees because it could not pay wages. It also points to mounting annual losses, internal disagreements and a failure so far to win a Swiss trading license. The article strongly infers that Lykke is on the verge of collapse.
“We are cutting back to the bone,”
Olsen told me. There was a problem paying wages. Some 17 staff have been let go, nearly half of the people employed in Lykke’s core unit. This is despite receiving a CHF500,000 coronavirus loan and having access to a separate Swiss fund that compensates workers who have been put on shortened working hours during the pandemic.
But Olsen also employs fighting talk.
“There is zero doubt of our forthcoming success.”
Olsen, who previously founded the successful digital foreign exchange platform Oanda, is pinning his hopes on two developments. He has brought in former Oanda quant trader Ion Oancea to re-engineer Lykke’s UK-based trading platform.
The second ray of hope for Olsen is his increased optimism about receiving a Swiss license to operate as a securities dealer and regulated exchange in Switzerland. This is a cornerstone of Lykke’s strategy and, according to Olsen, appears to be on the imminent horizon. If this can be achieved, Olsen is convinced that investors will stump up further money for the company.
Depending on who you talk to, the prognosis for Lykke varies to quite some degree.
“The signs point to it probably being all over in a couple of months,”
one former employee told me.
“Olsen is like a genie – just when you think things are hopeless, he pulls something out of the bag,”
says a current shareholder.
But why should it matter if Lykke joins the likes of Monetas, Tend, SwissRealCoin, Oyoba, Alethena or LakeDiamond as blockchain projects that have gone under or are in demise? Lykke is, after all, just one company from over 900 in the Swiss blockchain sector. A new industry littered with start-ups is bound to see plenty of failures.
Like it or not, Lykke is seen as something of a standard bearer in the Swiss blockchain industry. It’s one of the first such companies, is led by a successful entrepreneur and has stayed true to its decentralised roots rather than fill its ranks with mainstreet bankers.
Between 2016 and 2019 the company burned through CHF38.9 million in operating expenses – enough to make investors sweat.
As noted above, Switzerland has no shortage of blockchain companies but it needs world beaters if the country wants to be a world leader in the field.