Bitcoin Takes Root in Switzerland

  • Switzerland is one of the most Bitcoin-friendly countries in the world.
  • The Swiss city of Lugano announced it will accept Bitcoin for taxes and public services.
  • Other Swiss cities are likely to do the same and a national referendum may follow

Switzerland

Switzerland is a highly accommodating country for Bitcoin. The nation of Switzerland began as a rebellion against centralised Habsburg rule in the 13th century. It then developed a uniquely decentralised political system based on a confederation of states whose power is regularly put in check by a system of national referendums. In line with this entrenched distrust of centralised power, the Swiss population has maintained a preference for anonymous transaction systems such as gold and cash. Switzerland also has constitutionally-entrenched banking secrecy provisions, which prevent the government from knowing where citizens’ bankable assets are held. Bitcoin and Switzerland thus share a fundamental ethos - a decentralised system that values freedom, sound money and privacy. This explains Bitcoin’s surging popularity in Switzerland. As of last year, you can buy Bitcoin from any train station in the country and use it to pay over 85,000 merchants.

Switzerland has also been at the forefront of legislation. In 2020, the Swiss parliament adapted ten laws in order to give digital assets legal standing. In simple terms, if a digital asset does not establish rights vis-a-vis a third party, it is not considered a security. Bitcoin is therefore considered a means of payment and not a right or a security. This clear and common-sense legal framework has made Switzerland one of the most Bitcoin-friendly jurisdictions in the world.

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Lugano

Within this welcoming context, on 3 March 2022, Lugano, Switzerland’s third most important financial centre, announced a partnership with Tether Limited intended to put it at the forefront of Bitcoin and the blockchain industry. There are three main components to the partnership. The most newsworthy is the city's decision to allow its residents to pay for all public services in Bitcoin, Tether or its local token, Luga. This includes all personal and corporate municipal taxes and a range of municipal services such as parking tickets, dog taxes, sewage fees and, lastly, or perhaps terminally, cemetery taxes. This part of the plan is what led many reports and social media posts to say that Bitcoin was becoming “de facto legal tender” in Lugano and follows similar measures by the Swiss cities of Zug and Chiasso, which already accept Bitcoin for tax payments. The other important components of the partnership are technical training in collaboration with local universities and financing for start-ups and local businesses. As the local Corriere del Ticino reported after the partnership was announced, “Lugano is hungry for Bitcoin.”

The World

Lugano’s announcement comes amidst growing interest from cities around the world. Rio de Janeiro, for example, recently announced it intended to invest 1% of its treasury in Bitcoin to attract capital and investment in the sector. Miami is positioning itself as the Bitcoin capital of the US and the so-called “crypto valley” of Switzerland, Zug, has already established itself as a global investment hub for blockchain. As our previous analysis has argued, local governments are more responsive to grassroots demands, which explains why municipalities are increasingly competing against each other to attract Bitcoin. As Bitcoin becomes increasingly popular, it will then become a political issue at the national stage of many countries. In Switzerland, the idea of a national referendum to make Bitcoin legal tender is already being put into action.

Conclusion
Lugano is the latest Swiss city to welcome Bitcoin, but it certainly won’t be the last. Grassroots adoption of Bitcoin in Switzerland is likely to accelerate. Bitcoin will then reach the national debate and a referendum may take place on whether to make Bitcoin countrywide legal tender.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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