A city administration in Switzerland has enabled citizens and companies to make any municipal payment using two of the world’s best-known cryptocurrencies.
Payments to the authority in the affluent lakeside city of Lugano can now be made in Bitcoin (BTC) and Tether (USDT) – a move described by the municipality’s crypto payments champion as ‘pioneering’ for the public sector.
Lugano is the largest city in Italian-speaking southern Switzerland, with a population of more than 60,000 (and more than double that number in wider Lugano area). The city administration is involved in numerous initiatives promoting cryptocurrency as part of a broader strategy to champion the use of (and investment in) blockchain – the foundational technology on which almost all cryptocurrencies are based.
Cryptocurrency payments in Lugano were already possible for some transactions via the city’s online portal. With this new initiative, which has been more than 18 months in the making, the authority has extended the possibility for citizens and companies to use cryptocurrency to pay all its invoices, regardless of the service or amount invoiced.
Lugano’s administration describes its initiative as ‘representing an innovative evolution in the payment of municipal invoices’, a ‘significant step towards cutting-edge financial services’ and a move that makes ‘payments more flexible and modern for the entire community’. The crypto payment option will co-exist alongside existing payment methods such as online bank transfers using Swiss francs (CHF) and using post office counters.
RELATED ARTICLE Swiss city looks to enable tax payments by crypto – our news story (14 July 2022) on Lugano’s crypto payments plan
Five steps to a crypto payment
The municipality is directing people or businesses who want to make payments using cryptocurrency to www.lugano.ch/crypto, which also provides a five-step guide to making crypto payments, as well as a ‘frequently asked questions’ (FAQs) section.
Payers are instructed to: have at hand the City of Lugano invoice that they want to pay using cryptocurrencies, which should contain a QR (quick response) code; ensure they have cryptocurrencies accepted by the City – BTC and USDT on Ethereum – in their digital wallet (Ethereum is a blockchain-based software platform); go to the ‘checkout page’ (by clicking on a button); scan the QR code on the invoice (‘or manually enter the IBAN code on the payment slip’); and select the type of cryptocurrency you want and pay. People can request a receipt by email.
In its announcement of the crypto payments development, the authority states that the possibility to pay by crypto ‘also extends to previously issued and currently outstanding invoices’, regardless of the date of issue.
The city administration also highlights ‘the complete automation of the process, which guarantees efficiency and convenience in both the payment experience and the management of financial and accounting flows by the city administration’.
The FAQs section states that the City of Lugano ‘does not manage cryptocurrency treasury’ and that ‘any amount paid in cryptocurrency will be immediately converted into Swiss francs.’
Zug and Zermatt also crypto-friendly
A company headquartered in the Swiss city of Zug, Bitcoin Suisse, is working with Lugano as its technical partner.
The city of Zug itself as well as the Zug canton (administrative region) and the municipality of the famous Swiss mountain town of Zermatt already accept cryptocurrency as a form of payment.
Bitcoin Suisse’s chief product officer, Armin Schmid said in the company’s own announcement about Lugano’s move that his company was “delighted to support the City of Lugano in accelerating the use of Bitcoin technology as the foundation to transform the city’s financial infrastructure.”
“It is great to see that more and more Swiss municipalities are offering payments in cryptocurrencies as an option available to both citizens and companies, complementing traditional payment methods such as post office counters and e-banking platforms,” Schmid said.
Zug was the first Swiss locality to accept Bitcoin payments. It is home to so-called ‘Crypto Valley’ – a blockchain hotspot. In an announcement in May 2016 – titled ‘“Crypto Valley” now extends to the Stadthaus’ – the city administration said that it had ‘decided to accept Bitcoins as a means of payment for services up to 200 francs’ (about £181/$228 at current exchange rates) and that ‘in doing so, it wants to set an example for companies in the digital financial sector in the Zug region.’
Zermatt began to accept Bitcoin as a means for payment for local taxes and ‘official transactions’ in January 2020. A point-of-sale solution provided by Bitcoin Suisse was even installed in the town hall, so that fees for local authority services could be paid in Bitcoin.
RELATED ARTICLE Swiss city issues blockchain bond – a news story (27 January 2023) on Lugano’s public authority issuing a six-year bond of up to CHF 100 million (about £88m/$108m) via blockchain in a move being trumpeted by the parties involved as a public sector ‘first’
‘Full adoption and automation’
In Lugano the municipality’s deputy chief financial officer, Paolo Bortolin, has been day-to-day lead on the crypto payments initiative. He was also closely involved in Lugano’s issuance of a bond using blockchain technology at the start of the year – also an innovative move for the public sector and its use of financial technology.
Speaking to Global Government Fintech this week, he described Lugano as “pioneers” at a municipality level in the “unlimited” acceptance of BTC and USDT for “all” different types of payments to the state – something that, he said, differentiates Lugano from other Swiss localities. In this vein he also emphasised that “there is no need for a crypto-friendly invoice to be generated manually.”
The country El Salvador implemented a law more than two years ago that means businesses must accept Bitcoin as payment. The Central American country’s president, Nayib Bukele, is well known as a crypto enthusiast.
“Around the world there are other public institutions that accept Bitcoin for some of their payments. But we are probably the first to ‘go unlimited’, for all invoices, and with payments being made by ‘standard’ invoices, with no limit on the amount,” Bortolin told Global Government Fintech. “Our internal accounting services will not even notice somebody paid by crypto. It is a full adoption [of crypto payments] with full automation of all processes.”
“Naturally, it is also thanks to the other public entities that started before us, that we could now move ahead towards a full adoption,” he added.
Other blockchain enthusiasts at Lugano’s city hall include mayor Michele Foletti and Pietro Poretti, who is director of the municipality’s economic promotion division.
RELATED ARTICLE Blockchain bonds: digital issuance breakthroughs build buzz – a write-up of a webinar (convened by Global Government Fintech on 23 March 2023) asking: ‘Blockchain-based bonds: what potential for the public sector?’: Lugano’s Paolo Bortolin was the opening panellist, giving the inside track on the municipality’s blockchain bond issuance
Lugano’s blockchain and Bitcoin commitment
It is almost 18 months since Global Government Fintech reported that Lugano’s administration was in the process of obtaining ‘formal approvals and installing the technological infrastructure’ to enable the payment of taxes using cryptocurrency. The authority subsequently told Global Government Fintech in January that it was “finalising some formal and legal aspects” and the “project will be launched in the coming weeks.”
Global Government Fintech understands that a legal opinion that gave the city’s top brass confidence to proceed was eventually received in October. Technical preparations were then concluded to ‘go live’.
Lugano’s city authority already had a memorandum of understanding with Tether (the name of the company behind the Tether cryptocurrency) to ‘leverage Bitcoin technology as the foundation to transform the city’s financial infrastructure’ through an ongoing joint-initiative known as ‘Plan B’ (where the ‘B’ is written as ‘₿’, like the logo of the world’s best-known cryptocurrency). ‘The plan will scale blockchain and Bitcoin throughout the city to positively impact all facets of daily life for the residents of Lugano,’ the Plan B website states. ‘From small transactions with local merchants to larger efforts – such as paying annual taxes – blockchain will serve as the foundation for the city’s financial exchanges.’
The city administration has also backed a ‘Plan B Summer School’, which sees Tether collaborating with local universities and research institutes; and the ‘Plan B Forum’, a conference held annually in October.
Lugano is also already home to 3Achain, an ‘institutional blockchain platform’ promoted by the city administration; and operates a loyalty points system, LVGA Points, that aims to encourage spending within the local economy (points are collected in a blockchain-based digital wallet within an app, ‘MyLugano’, and can be used to pay for goods and services in locations including swimming-pool and museum).
RELATED ARTICLE European Parliament backs crypto rules to put EU ‘at forefront of token economy’ – a news story (25 April 2023) on European parliamentarians voting to approve the Markets in Crypto Assets (MiCA) regulation, making the EU the world’s first major jurisdiction to establish a comprehensive regulatory framework for cryptoassets
BIS: crypto is ‘flawed’
State authorities worldwide are typically more associated with working out how to regulate crypto rather than encouraging citizens to actually use it.
The European Union (EU), for example, became the world’s first major jurisdiction to establish a comprehensive regulatory framework for cryptoassets earlier this year when European parliamentarians voted to approve the Markets in Crypto Assets (MiCA) regulation. Switzerland is not part of the 27-member bloc.
The Bank for International Settlements (BIS), which happens to be headquartered in Switzerland, has regularly negatively criticised crypto. Its Annual Economic Report 2023, published in June, stated that crypto and decentralised finance (DeFi) ‘have offered a glimpse of tokenisation’s promise’ but described crypto as ‘a flawed system that cannot take on the mantle of the future of money’.
‘Not only is crypto self-referential, with little contact with the real world, it also lacks the anchor of the trust in money provided by the central bank,’ BIS stated.
This verdict came 12 months after BIS described the crypto universe as being ‘in turmoil’ in a chapter of its Annual Economic Report 2022 that set out a ‘blueprint’ for a future digital monetary system ‘grounded in central bank money’.