Lugano links its crypto city dream to Tether

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On Monday night, Dozens of shopkeepers and businessmen gathered in the blue-carpeted hall of a convention center in the Italian-speaking city of Lugano, Switzerland, to learn how to start accepting payments in cryptocurrency. They, along with a group of accountants, entrepreneurs and city officials such as Mayor Michele Foletti, were approached by Paolo Ardoino, CTO of Tether, the company behind one of the world’s most popular stablecoins (a type of cryptocurrency whose price is pegged to real-world currencies such as like a dollar). Lugano general secretary Robert Bregy says the merchants in attendance were “much more interested in these new types of payments than we expected.”

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The meeting is part Lugano Plan B initiativelaunch in March 2022 in partnership with Tether, which aims to turn the city into a center for crypto innovation. In addition to many investments in business and educational programs about blockchain technology and the organization of industry events, the brightest element of the plan is that the city will begin to accept bitcoin, tethers and its own LVGA cryptocurrency as payment for municipal taxes and access to some public services and events. The city has also made a commitment to encourage and help local businesses to voluntarily include these cryptocurrencies in their accepted payment methods (hard selling amid current monumental collapse in the price of bitcoin).

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The move is clearly meant to attract tech talent, companies and cryptocurrency holders to the city, which despite stunning views and a relatively mild climate, still lags behind other parts of Switzerland in terms of economic growth. Bregi says the plan seems to have worked so far as the city has been “under siege” from crypto companies, entrepreneurs and students looking to move there. Lars Schlichting, a lawyer at Swiss law firm Kellerhals-Carrard who specializes in the crypto sector, says he is currently working with “at least 10 companies, which is a lot more than usual” and all of them want to move to Lugano.

Ardoino says Plan B is a way to lay down a red carpet for businesses and cryptocurrency fans who want to flock to Lugano. But Tether itself will be in the spotlight: since the plan was announced, the company has become de facto Lugano Crypto Opportunity Project Manager with significant influence in shaping the digital state of the city.

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Lugano now competes with the German-speaking canton (or state) of Zug, a Swiss region known for its crypto activity that has acquired the nickname “Crypto Valley” over time. Even though Zug is small and sleepy, he has some of lowest income tax rates in a country looking to do so, a factor that has helped attract several high-profile organizations in the crypto space, notably the Ethereum Foundation. Zug also allows cantonal taxes for payment in bitcoins or ether, Ethereum cryptocurrency.

Lugano’s plan appears to be pushing the envelope, expanding the acceptance of crypto payments to a wider range of government services and generally integrating crypto more deeply into its economic fabric. Bregi says that while Zug’s appeal is mostly based on tax considerations, Lugano’s filing is “the perfect place to live, run a crypto business and thrive.” He adds that the city’s tax rates will never drop to Zug’s levels for the foreseeable future.

Lugano’s first foray into crypto came in 2020 when, amid the Covid-19 pandemic, the decision was made to launch the LVGA stablecoin with the aim of stimulating digital payments and supporting the local economy. LVGA can only be spent at Lugano’s holiday destinations and businesses and cannot be bought or exchanged on online cryptocurrency exchanges. Each LVGA is backed by one Swiss franc from Lugano’s treasury, Brega said. “This is not MiamiCoin,” he jokes, cryptocurrency on urban topics without practical use which was recently launched by the crypto firm Stacks.

Lugano’s partner, Tether, is an industry giant. repeatedly subjected to scrutiny and has been subject to occasional regulatory sanctions throughout its seven-year existence due to ongoing doubts about whether its $80 billion tokens are indeed backed by dollar reserves. October 2021 The US Commodity Futures Trading Commission fined the company $41 million. for the shortage of cash reserves in the period from 2016 to 2018.prepared by Lugano Councilor Sarah Beretta Piccoli in March, who asked the city government if crypto payments would increase the risk of tax evasion. The government responded that its interaction with Tether is characterized by a “spirit of extreme openness and transparency” and that the presence of cryptocurrencies in a public decentralized online ledger would actually make tax evasion more difficult.

Lugano is not the first for Tether. Company plays a key role in El Salvador’s acceptance of Bitcoin as legal tender, as an issuer the so-called “volcanic bonds” of the country. which will be backed by investments in bitcoin. The launch of the bonds has been repeatedly delayed since it was announced in November, but Ardoino says he expects the law to allow for a June issue.

Ardoino says the company views its work in both El Salvador and Lugano as “philanthropy,” although critics such as anti-cryptocurrency blogger David Gerard point out that companies associated with Tether started working in the government of El Salvador after the company’s work in the country.

Ardoino says that even if Tether does not receive any payments from the city as part of its participation in Lugano’s Plan B helping global cryptocurrency adoption, Tether and its parent company, cryptocurrency exchange Bitfinex, will end up with more business.

“If many countries accept bitcoin, it will be a win-win because we are in this industry,” he says. Of course, the inclusion of Tether in the top three cryptocurrencies accepted and promoted by Plan B will be beneficial for the company itself. In a written response to a question from Beretta Piccoli seen by WIRED, city officials said the fact that “almost all” of Tether’s management team resides in Lugano was a key factor in the partnership. Tether itself is not based in Switzerland, although Ardoino says he is considering moving “some units” of the company to Lugano, and that was hiring staff dedicated to the partnership.

Ardoino says Tether is currently working with two more local governments to look for similar partnerships, but the company declined to name them. “We train them, right?” He says. “Then it’s up to them whether they go for it or not.”

Lugano still has a ton of unresolved issues, including the fact that the city has yet to start accepting crypto payments for taxes and utilities, although Bregi expects a partial rollout to begin by the end of 2022. While the city has confirmed that bitcoin payments will use the fast Lightning network, which solves the usual slowness of crypto payments, and stablecoin payments will be made through the Polygon blockchain, Bregi says the city will not be able to put crypto on its balance sheet, and it is currently “looking into » companies that can help with immediate conversion of cryptocurrencies to Swiss francs. However, these third-party services typically charge a fee for their services, which could mean that people paying taxes in crypto have to pay more than if they used regular francs. However, Ardoino, who is helping the city choose the best provider for this service, says the fee is likely to be very low — “about 20 to 30 basis points,” he says. Ardoino says none of the companies in question are affiliated with Tether.

He also says that Bitfinex may sell its services to Lugano merchants who need to convert crypto-to-fiat payments, unless the store owners themselves decide to simply store the cryptocurrencies without conversion. However, this would not be easy given the relatively high capital gains taxes in Lugano, not to mention the vagaries of the price of bitcoin.

Some individual merchants have already begun accepting crypto payments to attract more customers, Brega said, though this has happened without any involvement from the city. An article in the local newspaper reports that some businessmen in Lugano believe the move will help them expand their customer base.

“A restaurant that accepts bitcoin will attract people who pay with bitcoin,” Schlichting says. – Initially, in my opinion, it will mainly come down to marketing. But the ultimate goal is the digitization of society and the canton of Lugano.”


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