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How the Swiss City of Lugano Transforms Into a Hub for Digital Currencies

Lugano's diverse digital currency vision

In Lugano, Switzerland, a pioneering vision for the future of digital currencies is taking shape. The city's chief financial officer, Paolo Bortolin, envisions a landscape where Bitcoin, central bank digital currencies (CBDCs), and stablecoins not only coexist but thrive together, each serving unique purposes. 

Bortolin explained in a recent interview:

"Bitcoin, being Bitcoin, is a constant presence and operates independently in a fully decentralized manner," 

He contrasted this with CBDCs, which are centralized and serve different functions: wholesale CBDCs for institutional transactions and retail CBDCs for everyday payments. Bortolin highlighted the potential for these diverse digital currencies to reshape Lugano's financial ecosystem without directly conflicting with each other. This optimistic outlook points to a future where traditional and digital currencies blend seamlessly in the city's economic fabric.

The balancing act: Bitcoin, CBDCs, and stablecoins in Lugano

Lugano's financial landscape is a delicate balancing act between various forms of digital money. While Bitcoin offers decentralized independence, CBDCs introduce a centralized digital counterpart to traditional currencies. Paolo Bortolin elaborated on these differences, stating:

"Wholesale CBDCs are used within the financial sector, whereas retail CBDCs might become the digital standard for daily transactions, akin to the traditional Swiss franc." 

He also pointed out the emerging role of stablecoins like Tether (USDT), especially before the widespread adoption of retail CBDCs. 

Bortolin remarked, suggesting a future where one might emerge as a leading digital counterpart for major currencies:

"These stablecoins, issued by private entities, could compete for dominance," 

Lugano’s embracement of this digital diversity reflects an innovative approach, anticipating changes and challenges in the global financial ecosystem.

The future of Lugano's digital currency landscape

The future of Lugano's digital currency ecosystem looks dynamic and forward-thinking. Paolo Bortolin shared insights into Switzerland's wholesale CBDC project Helvetia III, noting:

"While we haven't actively participated in this new project — only two bonds have been issued under this system so far — discussions are underway to proceed with this approach in the coming months." 

He emphasized the inevitability of integrating a Swiss National Bank-issued CBDC into Lugano’s financial operations. This proactive stance extends to local initiatives too. In December 2023, Lugano broadened its crypto adoption, accepting Bitcoin and USDT for taxes and other community fees. The city also supports LVGA, a local blockchain-based stablecoin. With over 400 BTC and USDT-accepting merchants and 14,000 users, Lugano's Plan B initiative underlines the city's commitment to a digitally inclusive financial future.