Colombia planning to prevent tax evasion with national digital currency: Report

The growing economy is reportedly turning to digital currencies as a weapon against illicit financial activities

By Shashank Bhardwaj

Image: Shutterstock

Reports indicate that there are ongoing discussions at the country’s tax and customs agency about national digital currency plans. According to Luis Carlos Reyes, the head of the Colombian Tax and Customs National Authority, this digital currency would be created to discourage and prevent illicit financial activity such as tax fraud.

This move comes as another step in the country’s efforts to improve financial transparency alongside the widespread economic growth they have experienced in the second quarter. The GDP has risen 12.6 percent as opposed to a projected 12.1 percent growth. According to the report, 6 to 8 percent of the country’s gross domestic product in 2022 would be attributed to tax evasion.

Reyes claims that the digital currency would not just help clean up the financial system but also enhance user experience, commenting, “The creation of a digital currency would make these transactions easier for the consumer.”

Meanwhile, he did not go into specifics as to what kind of digital currency they would be looking to launch: a central bank digital currency (CBDC) or an asset-backed national currency such as Venezuela's Petro digital currency project. This is not the first time this conversation is coming up in 2022 since Hernando Vargas, technical deputy governor at the central bank of Colombia, previously discussed the issues that could arise with a retail CBCD. Vargas explained that cash continues to be the preferred method of low-cost payments in Columbia, which is why the introduction of crypto would be tricky, “A line of defense against a widespread use of cryptocurrencies and stablecoins is weaker in Colombia than in other jurisdictions and the discussion about the adoption of a retail CBDC becomes particularly interesting.”

This is not the first big news to come out of Columbia this month, since Gustavo Petro was sworn into office as President on 7 August, sparking these discussions around a national digital currency in the government. Petro has previously voiced his support of crypto assets, stating, “Virtual currency is pure information and therefore energy.” This explains why the company is looking towards digital currency for its future, which looks to be promising given the rising GDP.

Shashank is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash

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