The City Council of Zug, a city in the east Switzerland, has announced the launch of a pilot project that implies that municipal services can now be paid with bitcoins. The testing stage will run until the end of 2016.

The program has been approved at a meeting of the city council of Zug. During the first phase of the pilot program, there will be a limit of 200 Swiss francs for bitcoin payments. Amounts exceeding this sum should be still paid with fiat money.

At the end of 2016, the city council will hold another meeting to discuss and review the results of the experiment. If the outcome is considered satisfactory, the city council plans to authorise the use of bitcoin for payments of a wider range of municipal services on a regular basis and without any amount restrictions. Furthermore, the city authorities may also allow payments for municipal services with other cryptocurrencies.

In a report published in the local newspaper StadZug, Dolfi Müller, Zug mayor, confirmed the intention of the city authorities to carry on with the promotion of innovative technologies.

“We want to express our openness to new technologies by expressing our own experiences. And we will invite FinTech companies in the region to exchange ideas with the City Council. Our goal is to meet more precisely their needs for optimal development in our flourishing economic environment.”

Zug is often called Crypto Valley due to a large number of blockchain companies concentrated here including such giants as Xapo, Ethereum and ShapeShift. Many businesses decided to move their headquarters to the canton of Zug because of its beneficial tax regime. It can offer the lowest in Switzerland personal income tax for the richest — 22.86%. Furthermore, according to local regulations, bitcoin is treated like a foreign currency and, therefore, is not subject to VAT. The city is already considered one of the world's economic centres. About 3% of the world petrol (oil and oil products) is traded through Zug and the neighbouring town of Barr, according to the Cryptocoins News.

Elena Platonova