The Swiss city that lets you pay for most things with bitcoin

In a McDonald’s restaurant near a lake surrounded by mountains, in the center of the Swiss city of Lugano, a customer orders coffee.

“Can I pay with Bitcoin?” He asked, and the person behind the counter held up what looked like a credit card payment terminal.

It is actually a cryptocurrency payment machine. The equipment was distributed free of charge to local retail businesses by the city council.

The buyer pays via contactless payment, from the Bitcoin wallet on his mobile phone. The bill comes to 0.00008629, which is approximately $8.80 (£6.60).

Few people who have bought Bitcoin would even consider using it to buy actual things in stores. Instead, it is generally viewed as an investment, a bet that its value will rise.

But in Lugano, in the Italian-speaking part of Switzerland, the story is different.

While you can of course still pay for everything in Swiss francs, around 350 shops and restaurants now accept Bitcoin as well. The local authority has even started receiving payments in cryptocurrency for municipal services. You can, for example, pay for preschool childcare with Bitcoin.

I spoke with a McDonald’s customer, Nicolas, who comes from France. He is what we would call a true Bitcoin believer.

“The great thing about paying with Bitcoin is the feeling of freedom it gives you,” he says. “You are no longer dependent on the financial system with its intermediaries and costs.”

Nicholas says he discovered Bitcoin cards in Switzerland. These are prepaid gift cards. You can buy a certain amount in Swiss francs but download it in Bitcoin to the digital wallet on your phone.

I walk through the center of Lugano, on a main street where almost all the shops sell luxury goods. Mainly expensive jewelry or clothes.

At a store called Vintage Nassa that sells new and used bags and watches, owner Cherubino Frei told me he accepts bitcoin because the processing fees he has to pay for each transaction are lower than those charged by credit card companies.

For Bitcoin, the percentage is generally less than 1%, while for debit cards it can be up to 1.7%, and up to 3.4% for credit cards. Although for the last two it can vary from country to country.

I ask Mr. Fry if he has much business in Bitcoin.

“Actually, not much. Right now, just sporadically, just some clients,” he says. “But using Bitcoin will be like a growing tree, and that tree will grow significantly in five or ten years.”

A stone’s throw from Mr. Fry’s store, I visited the headquarters of Plan B, an initiative launched in 2022 by the city of Lugano in cooperation with the cryptocurrency platform Tether.

With the letter B standing for Bitcoin, its stated goal is to educate people about the cryptocurrency, and “make Lugano the European hub of Bitcoin.”

“I want to talk about an experiment I did last July,” says Mir Liponi, director of the Plan B Center. She explained that she encountered a problem with her bank, which resulted in her being unable to access her money.

For 11 days, she had no means of payment, other than bitcoin, but she says the experiment went well, and that you can mostly survive on just bitcoin in Lugano.

“She’s missing public transportation right now… Another way is gas. Groceries are fine. I’ve had things delivered home, even.”

“There are a lot of medical places, but no dentist. The other big thing is [energy] Bills. You can’t pay bills with Bitcoin yet.”

Ms. Liponi adds that in the future she wants to see “circular economies where people earn bitcoin, keep bitcoin, spend bitcoin, and pay for services with bitcoin.”

However, elsewhere, similar Bitcoin projects such as Lugano have failed.

In 2021, El Salvador introduced legal Bitcoin alongside the US dollar. To encourage its use, the government gave people the equivalent of $30 in bitcoin they downloaded through an app.

“What people did was download the app, exchange their bitcoin for dollars and never use it again,” says Vincent Charles, president of cryptocurrency company Unchain Data.

He went to El Salvador earlier this year to see what the uptake of Bitcoin was like, concluding that people weren’t really using it, and that retailers and service providers rarely accepted it.

However, there are other successful examples of Bitcoin adoption from around the world. The Slovenian capital, Ljubljana, has been declared the World Capital The most suitable city for crypto In a report issued in April, Hong Kong and Zurich followed.

Back in Lugano, not everyone seems to be a fan of Bitcoin. In one of the parks overlooking the lake, there was a statue representing Satoshi Nakamoto, the pseudonym used by the anonymous person or people who claim to have invented cryptocurrency in 2008.

In August, Vandals Break the sculpture into small pieces and threw them into Lake Lugano.

“It’s interesting because not many things get vandalized here,” says Lucia, a passerby who lives in the city. “People are usually pretty well behaved. You don’t often see people with very strong political views, either.”

She adds, however, that she herself is skeptical of cryptocurrencies in general.

“At the University of Lugano, where I teach, there is a club promoting Bitcoin and everything. I find it surprising that institutions like my university promote cryptocurrencies so much. I think they are linked to crime, the dark web and speculation.

“A lot of people lose money because they invest in a cryptocurrency and then it crashes.”

Sergio Rossi is Professor of Economics at the University of Fribourg, Switzerland. He says bitcoin poses a risk to shopkeepers in Lugano or elsewhere because of its volatility – its value can rise sharply up and down.

Therefore, he says it is important that they immediately convert the Bitcoin they receive into Swiss francs, euros or any other currency issued by a government or central bank. These are also known as “paper” currencies.

“There is also a reputational risk with those cryptocurrencies used in illegal transactions, which could affect the city of Lugano and its financial institutions,” he adds.

Professor Rossi also warns that people’s Bitcoin is held by a digital third party, making it risky. “If the exchange where my digital wallet is registered fails or goes bankrupt, my cryptocurrencies will disappear immediately.

“I therefore lose the corresponding amount forever. By contrast, in Switzerland, all bank deposits are guaranteed up to 100,000 Swiss francs ($125,000; £94,000). This means that if the bank where I registered my savings goes bankrupt, I can recover them up to this amount.”

At Lugano’s town hall, I asked Mayor Michele Voletti if he was concerned that Lugano could become a magnet for mafia money.

“No. You can use paper money to do something good or something bad,” he says. “Same with Bitcoin.

“Mafia members are more interested in using paper currencies to launder money. When they sell drugs or something like that, they receive [physical] “Fiat money, not Bitcoin, because the most anonymous way is cash.”

He adds that Bitcoin remains positive for Lugano, and that 110 companies in the cryptocurrency sector have now moved to the city or are starting operations.