Callaghan Innovation's decision to fund a starry-eyed Bitcoin startup drew brutal criticism from tech professionals.

Yesterday, the Herald reported the Crown agency had provided $315,000 funding for loss-making Auckland crypto-currency startup Vimba, which wants to expand its bitcoin exchange and push into the UK.

While many have given up on bitcoin since its value against the greenback crashed from close to US$20,000 to under US$6000 in the new year, Vimba founder Sam Blackmore sees the digital currency surging 60-fold to US$600,000.

Kordia chief digital officer Aaron Olphert was less than impressed with where Callaghan is putting taxpayers' money, posting to LinkedIn, "Please explain to me what benefit NZ gets out of chucking cash at yet another Bitcoin startup."

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He added, "It doesn't even seem like they have much of a NZ presence [Vimba has six fulltime equivalent staff, one currently in the UK] and so we don't even get the benefit of jobs for local talent and also tax generation."

Spark head of technology (IOT) Andrew Leckie weighed in, "Unbelievable. Who assesses this stuff at Callaghan? I'm incredulous."

Katana Technologies strategic relationships director Steve Rielly weighed in, "I'd say the only benefit is to showcase to other local businesses that you can take any idea to Callaghan, no matter how zany, and the odds are they'll write you a cheque."

Melon Health founder Siobhan Bulfin said it was hard to understand Callaghan's rationale. Her own software startup was turned down for matching R&D funds from the agency, despite winning contracts in the US and gaining financial backing from Sir Stephen Tindall and Lance Wiggs' Punakaiki Fund.

John Gell, business development manager at superyacht technology exporter McKay said, "[It] totally blows my mind. We have real and hard data which shows the direct and tangible benefit that is achieved through communications enhancement, closing the digital divide which is so prevalent and yet they throw cash at these sorts of things like it's Monopoly money!."

Olphert responded, "Agree. It suggests they have money they need to get rid of and it is a lazy call to make as they can put in a report 'we invested in bitcoin and it's cool'."

On Twitter, commentator Russell Brown posted, "Pretty sure the local blockchain community will be cringing as hard as anyone," while Andrew Chen wondered if the story was a hoax.

A spokeswoman for Callaghan ruined Chen's conspiracy theory by confirming the Vimba grant.

However, she was loath to join the debate over the merits of its grant, offering only the generic comment that, "As with all of the R&D grants we administer, Project Grants are approved based on the project meeting set criteria. This criteria applies across the board.

"Callaghan Innovation grants do not endorse specific technologies, products or companies. Project Grants help incentivise innovation by co-funding up to 40% of R&D projects that meet specific set criteria. Last financial year 355 Project Grants were approved."

Blackmore was more willing to fight his corner, responding to Olphert, "We've been operating for four years and every bit of the software has been built by Kiwis and is continued to be built by Kiwis. We want to be a global company based in NZ, helping create a strong Kiwi blockchain eco-system, hiring Kiwis and paying tax in NZ. That is the end goal of these types of Government R&D grants to private companies."

Blackmore added, "Bitcoin is still a new technology and no doubt polarises. However, I believe that with a bit more research you may come away with a similar view to Bill Gates, Peter Thiel, Eric Schmidt and Richard Branson who believe Bitcoin will be a force for good in the world by enabling financial access for billions of people and enabling cheaper cross-border global trade."

Thiel - the adopted Kiwi citizen who made billions through early investments in PayPal and Facebook - has invested in a number of companies working on the blockchain, or the transactional database technology that underpins Bitcoin and is now being used in a number of contexts.

Blackmore did get backing from at least one party on social media, with Auckland-based crypto-currency and blockchain entrepreneur Fran Strajnar calling Olphert a "grumpy old man".

Vimba was creating genuine fintech IP, Strajnar said.

Callaghan's Project Grants scheme will continue after the agency's cornerstone Growth Grant programme is axed from April 1 next year as the Labour-led government shifts focus to a universal R&D tax break.