Lugano Between Traditional Finance and Innovation

Transcript

So next up, very importantly, we'll have Petro Poreti, director of city of Lucano and Paulo Bortalin, deputy CFO and vice director of the finance division. They are actually Paulo was the one when we did the last time the web three banking symposium actually in another part of Switzerland. he was the one coming up to us and saying why don't we do this same again even bigger even better in Lugano so um it was our pleasure and we have been planning it out for the last I would say like months 3 months four months uh or even more and so therefore we're very glad and also the entire location is coming with the support of

the city of Lugano which we're very proud of so uh let me give the stage to Paulo and uh and Petro to speak and close with their speech before we head into the lunch break. [Applause] Enjoy. Good morning everybody. Uh I hope you had a very interesting morning. I think speeches were very high level. All the speakers were fantastic. So we try to close this morning with a 10-minut talk between me and Petro. Maximum 10

minutes. Maximum 10 minutes because you know we have the lunch waiting. So we will try to short as much as possible. So Petro, a question for you. Why did we choose this title Lugano between traditional finance and innovation? Good question. Thank thank you Paulo. uh because we believe that Lugano was is remains uh a main financial app in Switzerland. Uh at the same time we believe that this app is facing several challenges. Uh above all limited access to natural markets for teaching based financial institutions and this highlights the need for uh strategic

innovation. Um it is crucial for us to explore uh new markets, new niche markets I would say and try to develop solutions that are tailored to the evolving needs of clients. Right? We understand very well that those needs are not immutable. You cannot keep offering the same uh services the same way you have been doing it for decades in a successful manner. Of course, but things change, right? You need to adjust. you need to adapt and be ready to serve uh new needs that those clients may have. And how to do that, right? You can do that if you know if you understand how to fully leverage uh the technology and uh that allows you also to uh possibly enhance the efficiency of

your existing operations. Uh this is why you ask yourself what is the role of the municipality because Paul and I today are representing a municipality anger minded know in commune. Well uh we help facilitating dialogue between on the one end tech companies innovators we could say and the more traditional banking uh operators and today's today's event is a good example of what we've been trying to do. Perfect. Thank you. Um we prepared just one slide because I think you have seen many slides this morning.

Uh we could speak the whole day about what we what we have done. We try to summarize in four points which are probably the most important points. So Pet tell us what we have done since 2020 up to today. The highlights Paulo the highlights only which I think are quite well uh reflected uh on uh on the on this slide. Starting from the Luga payment token, Luga payment token uh I would say was the first encounter of the city administration with DT with the blockchain technology. Let's say we've chosen that technology to provide an answer uh during a particularly challenging time which uh was the first month of 2020 which we all remember. Um

our um uh intervention was mainly in support of the uh retail distribution sector uh a sector that o overall I would say but particularly in this part of Switzerland suffered greatly uh from the pandemic uh which included as you remember or don't remember I don't know uh the lockdowns uh of course the uh consumer base shifting more and more toward uh electronic commerce platforms. Uh we also have a particular dynamic with uh our neighbor Italy. Uh when it comes to um retail and the Swiss Frank Euro exchange rate not always is not always

in favor of local um retailers as you can imagine. So we tried to find a way to support uh a sector that was uh struggling greatly. And this is how we came up with the idea of uh a payment token uh called Luga uh uh the payment token um which is uh issued by today by uh close to 500 between 450 500 partners uh of our network in the form of a cash back and that payment token can only be spent within the territory of the municipality which is a choice by the way it's a choice of course it's a choice and Uh it has grown uh quite significantly since we have over 2,000

uh 22,000 pardon me 22,000 active wallets. Uh we recently completed uh the affiliation to a new SRO uh which we are we are subject to. I believe that Lugano remains the only uh gained the only municipality that is a financial intermediary and therefore has to be supervised by an SRO and uh since uh the beginning of February we are now affiliated to Falco F whom I believe many of you know. So we have done the same uh type of on boarding process that you have uh that many of you have done for your projects. amazing results with this token and it's probably the only one city token in the world which is working very well. We have an adoption

of about 30% of the population using it at least sometimes but they have active wallets. So PTO tell us more now about the second point for instance plan B right I I I believe that plan B is what really helped putting Lugano on the web three uh map uh globally uh gives us a lot of visibility I I don't think I need to provide too many details about plan B uh most of you know what plan B is many of you uh have attended one or more editions of the plan B forum here at Palato Congressi uh in at the end of October That's when plan B forum takes place.

You know it's a joint initiative with tether. It is is therefore I believe a quite successful example of a private or public private partnership. And today we are happy to say that all the uh areas uh that we had uh announced uh in the month of March of 2022. All the areas of plan B have been either achieved or almost achieved. And those includes of course beside having a forum an yearly forum that is uh growing in importance in relevance and attracted last year I believe close to 2,000 people um we have a well functioning hub uh called the P space proof of work space in the city center and I uh

encourage you all to visit the hub I believe the two managers of the hub are in the room I see mateo or Emanuel right Emanuel right there he is uh for a visit is available you can ask him uh during your stay in Lugano um please visit the hub. We have uh funds that support startups that decide to um move their activities at Lugano. We have several education activities of course as well and let me say Paulo that the de facto legal tender that uh we had say we proudly announced in March of 2022 uh it's still going strong and uh it's also reflected in the unlimited uh possibility to pay taxes and any other

any other invoice issued by the city of Lugano today can be paid with Bitcoin Bitcoin lightning and tetar and that's really probably once again probably the only one seed in the world which really full acceptance with no limits in the amount. uh since here we are talking to bankers and etc fully regulated in the sense that you know we checked everything we can do it we are a municipality we follow all the rules but it's there every municipality every canton even the Swiss confederation if they want they can just put their camera on the side turn on the button and it's there so adoption is just there to be picked yes and allow me before move to next question to mention another project that I I consider it a quite uh a quite good example of is pioneering right uh a

very innovative approach uh of the municipality uh it originally started under the name of 3A chain a proof of authority we call it institutional uh blockchain it's it's really a city-led uh project this one um that has helped I believe uh increasing uh first of all of course the visibility of the city of Lugano when it comes to DT uh but also enabled us to learn a great deal uh internally right in house to acquire experience to acquire knowledge. I will come back to this point uh later if I may. Wonderful Paulo. Oh tell me I see something else.

Uh oh SDX can you can you tell us what that is? Why why did we put SDX on this slide? That's also an one of the amazing project we have done. Uh this is let's say I was responsible for this since working for the finances of the city of Lugano. I'm also responsible for issuing bonds. So you know Lugano unfortunately has high depth level 1 billion. So regularly we issue bonds on the market. So once we started plan B and we decide to adopt the blockchain and DT technology and then suddenly SDX shows up. We had some representative for SDX this morning. They explain very well what they are doing and we say well I cannot issue another traditional bond. I have to do it in the digital form. WFSDX

which is the first um world fully regulated regulated digital exchange. Now they are mixing up and and reorganizing because it it makes sense to do it. But in Switzerland we will continue with digital asset and digital bonds. That's perfect. So I show up in the market and asking to the banks who were participating I want to do a digital bond. At that time there was only one done by SIX itself and then UBS the second one which UBS was one of the three participants on the platform and then suddenly somebody from Lugano calls the bank say I want to do a digital bond like really say yes we are adopting blockchain you are working on the DT let's do it together to me was quite simple to do it I imagine that you know

it's a normal process of issuing a bond well very bad mistake uh in my career I issued probably three billion in bonds uh it takes me normally an hour. It took me between an hour and two hours to get ready for a bond and announcing opening up the book building and one to two hour later closing up everything and that's fine. This time it took me between four and five months to get ready. Uh just because I really undervaluated the fact that we are rated by Moody's and Moody say yes interesting but by the way this is a new platform so let's talk about potential additional material risk. say okay it's a good point to me was kind of normal but it's not so we spent three

three months with Moody's Techab and SDX to go deep in the technology in everything really uh the the the analyst from Moody's they were so professional immersed in the technology they were making question that they really didn't understand and the other side they really gave answer which I did really understand not understand but anyway at the end of the day we got the rating there was the same rating. That was a big concern. Will be the rating the same level? If not, just stop everything and forget SDX. But it was the same rating. Then other challenges came up. What about the investor? Will they buy a digital bond? They don't even know what a digital bond is, right? Nobody has purchased one before. And we talked to 25 investors explaining them the

project, explaining them why Lugana was doing this. And then honestly the last sentence on this meeting was well I gave you some interesting information but the reality is please underwrite this bond because here we are doing history for Switzerland. We have a digital exchange we have to use it. We have to show to the world that we are the first in the world to do this and do this not for Lugano do this for Switzerland for SDX for Sax for the bank for the financial sector and they did it. So the last challenge was the spread. Will the investor ask for a higher spread? Who knows? So we launched it and we got exactly the same spread that we had before. No additional cost. Perfect.

Perfect project. This brought us a huge visibility around the world since the beginning. That was January 23. We got call from Japan, from Taiwan, from Thailand, from the US and couple of delegation, one from Japan came to visit us for this and from Thailand also. We went to Quincy which is South Boston because they would like to issue also digital bond that was September 23 and we discuss a lot about this and actually Quincy city of Quincy is the first digital bond in the US has been issued by Quincy. So we're kind of twins now and we discussed not every week but almost with those guys. Amazing. So this brought a lot of connection around the world and a lot of visibility for Lugano.

Impressive. Impressive Paulo. Um but and maybe what is next? What is next? This is you. What is next? And and it just said time is out. So big ladies, time is out. You cannot see it, but it's out. Two messages before before launch from our side. The first one is that uh we're really convinced that Luganos tends to benefit greatly from uh greater integration into the Swiss web 3. More broadly speaking, I would say fintech ecosystem. Right, we are on the southern third of the Alps. We try to we try to create synergies, integrate as much as possible in whatever else is happening uh statewide in in Switzerland. So events like this one, events like the web tree banking symposium, this is

allow me to say is also why we were so adamant to uh bring this event to Lugano after the first very successful edition in Geneva of course which is a very important uh banking and financial hab in Switzerland. But we really wanted this event to be here uh in 2025. And so what we will continue doing uh as municipality but of course also alongside companies based here in Lugano, we want to continue enhancing our visibility uh in the rest of the country. We want to engage as much as possible actively of course in discussions across various platforms.

This may include academia of course uh among industry associations as well. There are several that are doing a a really good job in in in promoting the indust in facilitating this industry. of course also uh participate in coordinated dialogue with ultimately the decision makers and that includes of course the Swiss parliament, the Swiss federal authorities, the regulator uh a very very important player as well um in this sector and I made the the last message two weeks ago about two weeks ago here at Palata de Congress the um municipality unveiled uh Swiss Ledger you see you see the logo Swiss Swiss Ledger is the evolution of 3a chain 3a chain in the the institutional

blockchain that I mentioned, right? The the original one was launched in November of 2021 at the other Congress uh conference center uh that we have here in Lugano. So now we have a Swiss ledger uh which supports secure, scalable, temper resistant of course financial applications. It also utilize a proof of authority consensus model as much as 3A chain and by doing so with ledger enables use cases digital notoriization it's a it's an important one and and we know there are companies also in Lugano that are act very active in that field uh the interoperability uh with existing financial systems there is a project uh on Swiss ledger called

Swiss digital key uh that's another big one by the city of Lugano that introduces a secure digital identity as well as signature a signature solution that can as you can imagine help streamlining contracts uh banking services at the end of the day uh we're convinced that Swiss ledger can support open banking uh which is something that I believe at in Switzerland should be should deserves uh uh more more attention and this is probably in the context of Lugano building the bridge between fintech and fin and traditional financial that is really the underlying the underlying theme objective I think we are really we're over let let me just

signal that if during the lunch break you want to know more about Swiss ledger about Swiss digital key we have in the room Lorenzo Barzone uh who is managing this and feel free to approach him of course for more details about this exciting another project by the city of we're very proud of so we try to stay active a lot of work, but we are still here. We will be here. And the final award is yours and and nice dogs, Paulo. Oh, thank you. Uh, actually, this is a gift from Cryptoval Association. Maybe you can see the logo. Thank you to Nick and Saskia for this kind gift. But I really would like to thank the whole team of Cryptovalia for this amazing organization. Thank you for coming to

Lugano once again. And thank you to the all the guys and girls and and the team. Amazing. Thank you very much for this very first time of collaboration. Thank you.