The Colombian government has announced plans to launch a digital currency. One of the goals of this new currency is to curb tax evasion and strengthen the traceability of transactions by citizens. The proposed measure would also involve restrictions on cash payments and transactions over 10 million Colombian pesos ($2,400).
Colombia to launch its own digital currency
Many countries are considering digitizing parts of their economies to better understand and control the flow of money in their economies. According to statements by Luis Carlos Reyes, head of Colombia’s tax authority, DIAN, the Colombian government is planning to launch its own digital currency in the near future.
20} Reyes told local news outlet Semanathat it would be one of newly inaugurated President Gustavo Petro’s proposals to curb tax evasion, which is estimated at 6% to 8% of Colombia’s GDP. In this regard, Reyes said that the purpose of this digital currency is to strengthen the traceability of these transactions so that merchants cannot evade taxes using cash as a payment method.
Regarding the effects of this measure, Reyes estimated that.
This is equivalent to six to eight tax reforms carried out in the country, which would yield up to 1% or 1.5% of GDP.
Reyes, however, did not reveal any features of the digital currency or how it would work with the country’s traditional payment system.
Cash Restrictions
The introduction of digital currency would be accompanied by other measures currently under consideration. One such measure is to restrict payments in cash above a certain amount. Reyes confirmedthat this amount would be 10 million Colombian pesos (about $2,400)
However, this change may confuse Colombians’ payment channels: during the Covid-19 pandemic, the use of cash for payments decreasedbut cash is now one of the main payment methods in Colombia. According to statistics from Colombia’s Central Bank, the volume of banknotes in circulation has risen to its highest figure in the past 17 months.
Data from the Financial Supervisory Serviceshow that Colombians still prefer cash as their primary payment method for transportation (94%), groceries (80%), cell phone top-ups (78%), and rent (77%).
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