Crypto Firms Turn to Government Loans as Pandemic Strikes, Critics Not Pleased

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Documents this week showed billion-dollar crypto firms, the likes of ConsenSys, CipherTrace, Bittrex, and Tron, applied for public loans in the U.S. to protect against capital erosion. However, critics aren’t pleased.

The Anti-Government Government Club

Over 75 companies in the blockchain and cryptocurrency space – from sub-sectors like exchanges, general services, wallets, and security – applied for U.S. government loans since the latter’s rollout in April 2020.

Yesterday, documents received by CoinDesk revealed over $30 million was taken by crypto-companies. This includes billion-dollar players and even firms like Quantstamp, which raised millions for its token in an ICO.

Reeling from the economic implications of a pandemic, the U.S. government announced payroll loans to support employment in small businesses. Criteria were a bare minimum – any service with more than one physical location that employed less than 500 persons were allowed.

Moreover, if 60% of the loans went towards employees keeping their jobs for a minimum of eight weeks; the entirety of the loan would be forgiven.

Crypto firms – despite their narrative of quelling government help and breaking away from the financial system – wholeheartedly embraced the loan payouts. Firms like the Zcash overseer Electric Coin Company, Ethereum venture studio ConsenSys and Tron took high-six figures under the legalities of being small businesses.

Even crypto funds featured on the list – including Polychain Capital and Unchained Capital. Both firms claim to manage hundreds of millions in crypto-assets.

Satoshi’s Bailout Message Violated

For those in the space, Bitcoin creator Satoshi Nakamoto included the now-famous message in the first-ever BTC transaction; “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

He was presumably referring to how the predominant system is the supposedly liberal and capitalist system, how rescuing banks like that was a problem, and how bitcoin helps solve those issues.

CoinDesk’s Nikhilesh De wrote in the regard:

“The loans to blockchain startups are likely to be controversial among cryptocurrency users given the industry’s roots in the libertarian-leaning cypherpunk movement, which distrusted governments and banks.”

On a relevant Twitter thread, commenters argue that taking available subsidies allow business operations to continue regardless of the pandemic, in addition to avoiding any disadvantage to competitors that do take the benefits.

Another point raised was that venture investors pushed their portfolio crypto-startups to apply for the loans, even if the latter did not reflect the former’s opinion.

The highest loan takers, as seen in the disclosure, were ConsenSys (between $1 million and $5 million), Tendermint (between $350K and $1 million), derivatives exchange LedgerX (as Ledger Holdings, between $150K and $350K), and crypto payments firm Circle (between $1 and 2 million), as crypto publication The Block wrote.

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