The government of Colombia revealed its plans to launch a digital currency. each of the purposes of this new currency would be to curb tax evasion and enhance the traceability of transactions created by citizens. The proposed measure would even be accompanied by restrictions on cash payments and transactions of over 10 million Colombian pesos ($2,400).

Colombia to Launch Its Own Digital Currency

Many countries are currently trying to digitize a part of their economies in order to higher understand and control the flow of money in their economies. the government of Colombia is about to launch its own digital currency in the close to future, according to statements offered by Luis Carlos Reyes, head of the DIAN, the Colombian tax authority.

Reyes told local news outlet Semana this might be one of the proposals of the recently inaugurated president Gustavo Petro in order to curb tax evasion, estimated to be between 6% and 8% of the GDP of Colombia. On this note, Reyes stated that the aim of this digital currency would be to reinforce the traceability of those transactions thus merchants cannot evade taxes using cash as a payment method.

On the effectiveness of the measure, Reyes estimated:

“This is equivalent to six or eight tax reforms that have been made in the country, with which a maximum of 1% or 1.5% of GDP is obtained.”

However, Reyes didn't disclose any traits of the digital currency or the approach within which it might work alongside the traditional payment systems within the country.

Cash Restrictions

The introduction of the digital currency would even be accompanied by alternative measures that are presently being studied. one of these measures could be a restriction on payments in cash over a certain amount. Reyes confirmed this amount would be 10 million Colombian pesos, or close to $2,400.

However, these changes would possibly disrupt the payment channels of Colombians. whereas the use of cash for payments was reduced during the Covid-19 pandemic, money is presently one of the most cash payments in Colombia. Statistics from the central bank of Colombia show that the circulation of bills has up to its highest variety in 17 months.

According to information from the financial Superintendency, Colombians still like cash as their main payment method once paying for transportation (94%), groceries (80%), mobile phone top-ups (78%), and rent (77%).

(Sergio Goschenko, bitcoin.com, 2022)