Bitcoin Takes Another Step Forward: What's Behind Lugano's Plan — The Pace of Bitcoin Adoption Is Accelerating
On March 3, Lugano, a city in southern Switzerland, announced that it would adopt Bitcoin and USDT as legal tender and partner with Tether to position itself as the Bitcoin capital of Europe. This announcement drew widespread market attention. It marks the second region, following El Salvador's "Bitcoin City" initiative, to publicly disclose a Bitcoin-related plan. So, what are Lugano's underlying ambitions behind this move?
As Bitcoin continues to gain broader adoption and digital assets are increasingly recognized and embraced by the mainstream world, which countries or cities have already designated Bitcoin as legal tender? And what are the pros and cons of Bitcoin as legal tender?
Lugano's "Bitcoin Plan"
On March 4, 2022, the Swiss city of Lugano announced that Bitcoin, USDT, and the Swiss franc stablecoin LVGA would become legal tender in the city, allowing citizens to use these crypto assets to pay for public services or taxes. This announcement was made at an event called "Lugano's Plan ₿," jointly organized by the city of Lugano and cryptocurrency stablecoin provider Tether, as part of their collaborative "Bitcoin Plan (Plan ₿)." The Lugano-Tether partnership aims to establish the city as a hub for blockchain adoption in Europe.
The plan also spurred the launch of two funds. The first is a 3 million Swiss franc (approximately $3.26 million) fund jointly established by Tether and the Lugano government to incentivize shops and businesses across the city to adopt BTC, USDT, and LVGA tokens. The second is a 100 million Swiss franc investment fund that will finance local blockchain startups and blockchain service providers in Lugano.
Lugano is the largest city in the Swiss canton of Ticino and a lakeside city bordering Italy at Switzerland's southernmost tip. It is a renowned tourist destination and international financial market. This Bitcoin plan will enable Lugano's 60,000-plus citizens to pay all personal and corporate municipal taxes — such as public services, parking fines, fees for identity cards and passport issuance, and naturalization fees — using BTC, USDT and LVGA.
Tether and the Lugano government plan to showcase blockchain use cases by applying cryptocurrency payments within the community. The city has already partnered with over 200 shops and businesses to drive Bitcoin adoption. Additionally, they will leverage the Bitcoin Lightning Network to overcome scalability barriers for city payments.
It is worth noting that Switzerland has long been one of the more crypto asset-friendly countries. Previously, the country's largest online bank, Swissquote Bank, announced plans to launch its own digital assets trading platform in 2022 to meet growing customer demand for digital assets. When discussing this partnership, Tether's Chief Technology Officer Paolo Ardoino stated, "After Bitcoin was declared legal tender, El Salvador saw its GDP grow by 10% and tourism increase by 30%. Imagine what we can do in a city at the heart of Europe."
Bitcoin's Progress in Global Adoption
Of course, Lugano is not the only city or region to introduce Bitcoin as legal tender. El Salvador was the first and only country in the world to adopt Bitcoin as an official legal currency. On June 9, 2021, El Salvador passed a bill making Bitcoin legal tender in the country, and the bill officially took effect on September 7 of that year.
Compared to Lugano, El Salvador adopted Bitcoin as its second official currency, while the Swiss franc remains Lugano's sole legal tender. Therefore, El Salvador's Bitcoin initiative is clearly more "aggressive." Additionally, El Salvador also announced at a Bitcoin conference that it would build the world's first "Bitcoin City" within its borders, funding it through the issuance of Bitcoin bonds. According to El Salvador's Finance Minister, the country was set to issue its first Bitcoin sovereign bond between March 15 and 20.
Perhaps it is the "demonstration effect" of El Salvador and its remarkable progress that has inspired Lugano to partner with Tether and launch its own Bitcoin plan — not only incorporating Bitcoin as legal tender but also committing to building a hub for blockchain adoption and becoming the Bitcoin capital of Europe to promote the use of Bitcoin and other crypto assets.
For a sovereign nation or region, adopting Bitcoin as legal tender is an extremely innovative and "bold" decision. Of course, on a global scale, Lugano is not the only region taking action in this space. This year, both California and Tonga have expressed interest in or plans to establish Bitcoin as legal tender.
In March of this year, foreign media reported that the California state legislature introduced a bill that could establish Bitcoin as legal tender in the state. Republican state legislator Jordan Cunningham introduced Assembly Bill 2698 on February 19, which was subsequently referred to a committee. However, a constitutional amendment may be required before it can pass, and that process is complex.
The small Pacific nation of Tonga also indicated in March of this year that it may adopt Bitcoin as legal tender in Q2 2023, with Bitcoin mining to begin in Q3. Lord Fusitu'a, a former Tongan parliamentarian, disclosed the country's timeline for Bitcoin adoption. Step 1 is remittances, Step 2 is legal tender, Step 3 is Bitcoin mining, and Step 4 is moving national treasury holdings into Bitcoin — effectively upgrading the nation to the Bitcoin standard.
Why Is Bitcoin Being Designated as Legal Tender?
In the midst of the Russia-Ukraine conflict, Ukraine — sitting at the epicenter of the crisis — already ranks among the top five countries for cryptocurrency usage. It has passed the new Virtual Assets Act, establishing the legal status of Bitcoin and other cryptocurrencies in the country. The legislation will permit and recognize crypto asset trading. According to the Kyiv Post, Ukraine was set to open its crypto asset market to businesses and investors in 2022.
So, why are more and more countries inclined to embrace Bitcoin or even designate it as legal tender?
First, for some countries and regions, Bitcoin's decentralization and deregulated nature can bring significant advantages. In particular, for smaller nations facing currency collapse or war-related crises, it is easy for them to turn to crypto assets as a "non-mainstream" form of currency. For example, Venezuela, burdened by prolonged and severe economic deterioration and escalating inflation, has become a hotspot for Bitcoin mining and cryptocurrency payments.
Another case in point: In El Salvador, where 70% of the population lacks access to banking services, the country hopes to attract foreign investment by building a cryptocurrency ecosystem and to change its reliance on cross-border remittances. For El Salvador, where remittances account for 24% of GDP, Bitcoin could potentially reduce its cross-border trading costs compared to traditional remittance channels.
Second, as Bitcoin gains wider global promotion and adoption, it is progressively becoming a global asset. Its reputation as "digital gold" and its growing acceptance by the mainstream world have deepened and transformed many countries' perception of Bitcoin.
However, on the other hand, due to Bitcoin's deregulated nature and high price volatility, adopting Bitcoin as a legitimate currency is a complex and challenging undertaking for most countries. Some critics argue that making Bitcoin legal tender could pose risks to the stability of a nation's economic system. Additionally, Bitcoin's transaction fees and transaction times are also factors that need to be considered. Of course, in recent years, we have seen the rollout and use of the Lightning Network in some countries, which can play a supporting role in payments. International financial institutions such as the World Bank and the International Monetary Fund (IMF) have expressed concerns or even opposition to the adoption of Bitcoin as a national currency, as privately issued tokens circumvent government and central bank oversight responsible for maintaining economic and monetary stability.
It is expected that in the future, countries' attitudes toward crypto assets will continue to diverge significantly. However, as Bitcoin's "mainstreaming" trend evolves, Bitcoin City plans similar to those of El Salvador and Lugano may emerge in more countries or cities. The adoption of Bitcoin in the mainstream world and the growing number of countries beginning to bring crypto assets under regulatory oversight will profoundly impact Bitcoin's future status and development.
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