When El Salvador became the first country to adopt Bitcoin as legal tender in September, excitement rippled through the cryptocurrency world. It was a big step for crypto at large, and a giddy indicator of what the future could hold. Soon, enthusiasts started speculating if another country would follow.
Most believed it would be another low-income country, given weak currencies are typically very prone to shifting market environments and high inflation. Panama was perhaps the favourite, as they swiftly announced a bill to make Bitcoin legal tender following El Salvador’s move last year. Paraguay was another guess often floated, buoyed by their bill to regulate Bitcoin mining and trading before Christmas. All the frontrunners seemed to be Latin American, however, with Honduras and Guatemalan rumours also circulating on Internet forums.
Nobody got it right though. Because yesterday, the winner was announced as…a small city in southern Switzerland by the name of Lugano.
With a population of 62,000, Lugano is the ninth largest city in Switzerland. Sitting beautifully on Lake Lugano, it looks every bit as idyllic as a Windows screensaver.
So, what does the crypto announcement mean?
Lugano have played it a little differently than El Salvador, who went all-in on Bitcoin alone. The Swiss city have announced that Tether and LVGA (a CHF stablecoin), as well as Bitcoin, are now “de facto” legal tender.
El Salvador’s bet on Bitcoin is a lot more impactful and economically consequential on a macro scale, and not only for the fact that it is a country rather than a small city such as Lugano. But that’s not to say this won’t change anything in Lugano.
Citizens can now pay taxes in crypto, as well as parking tickets, tuition fees and public services. 200 businesses are also anticipated to accept payment for goods and services. So, while Bitcoin is not on equal footing to the Swiss franc, I think its especially interesting that stablecoins have been included as an option for citizens.
A repeated criticism of El Salvador’s decision was the detrimental impacts that Bitcoin’s notorious volatility would have when adopted as legal tender. But with stablecoins, price is obviously not a concern given the peg to fiat. It gives citizens a neat extra option – want to hold your savings in stablecoins, farming yield on a DeFi protocol, before seamlessly transferring over cash for your parking ticket? Well, that’s now possible.
Of course, people will criticise the move as pointless and a publicity stunt. But in reality, what is bad about that? Here we are talking about a city of 62,000 in the middle of Europe, which never would have happened otherwise. What does the city have to lose? Blockchain startups, crypto unicorns and freelance enthusiasts are all the target of this change, but even if it only leads to a small bump in tourism, that’s still a win.
As I said above, the scale of the law is so minor that it is unlikely to cause any serious ramifications, such as what sceptics on El Salvador claim. The IMF, who urged El Salvador last month to “narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status”, won’t be knocking on the Lugano mayor’s office anytime soon. The concern surrounding financial integrity, protection of citizens and fiscal liabilities (given El Salvador’s small pool of government resources) won’t be a concern in Switzerland.
Tether are in partnership with Lugano, with chief technical officer Paolo Lugano saying at yesterday’s Plan B event that the firm had fund of 3 million Swiss francs together with Lugano officials, in order to push the adoption of Bitcoin, Tether and the LVGA token. He repeated the main goal – an initiative focused on making the city a buzzing blockchain hub in Europe.
It’s a fun episode in the exciting world of crypto, and it will be interesting to track whether Lugano can attract talent, businesses and traders to their beautiful city.
So, who is going to be next?