I live in Iceland, and it is not possible for me to buy anything with a magnetic stripe.

Here is the campaign that was ran by the largest payment processor letting everyone know the old system was going away. It was heavily advertised all over the country.

http://www.valitor.is/fyrirtaekjalausnir/pinnid-a-minnid/

Perhaps there is somehow an exception for foreign cards? But this is news to me, and seems like it defeats the entire purpose.