A Swiss City Where Bitcoin Pays for Almost Everything

In a McDonald's located by a lake surrounded by mountains, in the heart of the Swiss city of Lugano, a customer orders coffee. "Can I pay with bitcoin?" he asks, and the person behind the counter hands him what appears to be a credit card payment terminal. However, this is actually a machine designed for cryptocurrency payments. The equipment has been provided free of charge to local retail businesses by the city council.

The buyer pays using contactless technology from his mobile phone's Bitcoin wallet. The total cost is 0.00008629, which is approximately $8.80 (£6.60). Many people who have invested in Bitcoin may not consider it as a practical means of purchasing everyday items. Instead, it is often viewed as an investment, a bet on its value increasing over time.

However, in Lugano, in the Italian-speaking region of Switzerland, things are different. While it is still possible to pay for everything in Swiss francs, around 350 shops and restaurants now also accept Bitcoin. The local authority has even started accepting cryptocurrency payments for municipal services, such as pre-school childcare.

I spoke with the McDonald's customer, Nicolas, who hails from France. He is what could be described as a true believer in Bitcoin. "What's great about paying in Bitcoin is the feeling of freedom it gives you," he says. "You are no longer dependent on a financial system with its middlemen and its costs."

Nicolas mentions that he has discovered Bitcoin cards in Switzerland. These are prepaid gift cards where you can purchase a certain amount in Swiss francs, which is then downloaded into a digital wallet on your phone as Bitcoin.

As I walk through the center of Lugano, down a high street filled with luxury shops, I notice that most of the stores sell high-end items like jewelry or expensive clothing.

In a shop called Vintage Nassa, which sells new and second-hand bags and watches, the owner, Cherubino Fry, tells me he accepts Bitcoin because the processing fee per transaction is lower than those charged by credit card companies. For Bitcoin, the fee is generally below 1%, while for debit cards it can be as high as 1.7%, and up to 3.4% for credit cards. These fees can vary depending on the country.

I ask Mr. Fry if he does much business in Bitcoin. "In reality, not a lot. For now, only sporadically, only some clients," he says. "But using Bitcoin will be like a tree growing, and this tree will grow very big in five, 10 years."

A short distance from Mr. Fry's shop, I visit the headquarters of Plan B, an initiative launched in 2022 by the City of Lugano in collaboration with the cryptocurrency platform Tether. With the "B" standing for Bitcoin, the initiative's goal is to educate people about cryptocurrency and "to make Lugano the European hub for Bitcoin."

"I want to talk about an experiment I did this July," says Mir Liponi, the director of the Plan B hub. She explains that she had a problem with her bank, which resulted in her not being able to access her funds. For 11 days, she had no way of paying except with Bitcoin, but she says that the experiment turned out well, and that you can mostly survive just on Bitcoin in Lugano.

"It's missing public transportation at the moment… another one is fuel. Groceries are okay. I got things delivered at home, even. Plenty of medical places, but not a dentist. And another big thing is [energy] bills. You cannot pay bills in Bitcoin yet."

Ms. Liponi adds that in the future, she wants to see "circular economies where people earn Bitcoin, keep Bitcoin, spend Bitcoin, pay for services in Bitcoin."

Yet, similar Bitcoin projects to Lugano's have faced challenges. In 2021, El Salvador made Bitcoin legal tender alongside the US dollar. To encourage its use, the government gave people the Bitcoin equivalent of $30 that they downloaded via an app.

"So what people did was download the app, exchange the Bitcoin for dollars and never use it again," says Vincent Charles, head of crypto currency firm Unchain Data. He went to El Salvador earlier this year to see how Bitcoin uptake was going, and concluded that people don't really use it, and retailers and service providers rarely accept it.

However, there are other successful Bitcoin adoption examples from around the globe. The Slovenian capital Ljubljana was declared the world's most crypto-friendly city in a report back in April, followed by Hong Kong and Zurich.

Back in Lugano, not everyone seems impressed with Bitcoin. In a park on the lakefront, there used to be a statue representing Satoshi Nakamoto, the pseudonym used by the unknown person or persons who claim to have invented the cryptocurrency back in 2008. In August, vandals broke the sculpture into pieces and threw it into Lake Lugano.

"It's interesting because not that many things get vandalized around here," says Lucia, a passerby who lives in the city. "People are usually fairly well behaved. And you don't see often people having very strong political opinions either." She adds, though, that she herself is skeptical of cryptocurrencies in general.

"At the University of Lugano where I study, there's a club to promote Bitcoin and everything. I do find it surprising that institutions such as my university would promote cryptocurrencies so much. I think they are associated with crime, with the dark web and speculation. A lot of people lose their money because they invest in a cryptocurrency and then it crashes."

Sergio Rossi is a professor of economics at Switzerland's University of Fribourg. He says that Bitcoin is a risk for shopkeepers in Lugano or elsewhere because of its volatility—its value can go sharply up and down. So, he says, it is important that they instantly convert the Bitcoin they receive into Swiss francs, euros, or another currency issued by a government or central bank. These are also known as "fiat" currencies.

He adds: "There is also a reputational risk with those cryptocurrencies used in illegal transactions, which could affect the city of Lugano and its financial institutions." Prof. Rossi also cautions that people's Bitcoin is held by a digital third party, which makes it risky. "If the platform where my digital wallet is recorded fails or goes bankrupt, my cryptocurrencies disappear instantaneously. And therefore, I lose the corresponding amount forever. By contrast, in Switzerland, all bank deposits are guaranteed up to the amount of 100,000 Swiss francs ($125,000; £94,000). This means that if the bank where my savings are recorded goes bankrupt, I can recover them up to this amount."

At Lugano town hall, I asked Mayor Michele Foletti if he is concerned that Lugano could be a magnet for mafia money. "No. You can use fiat money to do something good or something bad," he says. "The same with Bitcoin. And mafia people are more interested to use fiat for money laundering. When they sell drugs or something like this, they receive [physical] fiat money, not Bitcoin because the more anonymous way is cash," he says. He adds that Bitcoin continues to be positive for Lugano, and that 110 crypto-sector companies have now moved to, or started up, in the city.

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