Key Takeaways:
- The head of Colombia’s tax agency suggested that the country’s central bank might launch a digital currency.
- Colombian tax evasion, which is thought to account for up to 8% of GDP, could be reduced using a national digital currency.
To combat tax evasion, the Colombian government has declared its intention to implement a CBDC as quickly as feasible.
To stop the outflow of money, the newly inaugurated president Gustavo Petro wants to put a system of CBDCs as quickly as possible, according to Luis Carlos Reyes, head of Colombia’s tax office.
The objectives of this new currency would include lowering tax evasion and enhancing the accountability of citizen transactions. Limitations on cash payments and transactions worth more than 10 million Colombian pesos ($2,400) are also part of the proposed legislation.
The first ever left-wing president of the nation, Petro ran on a platform to fight corruption, create more opportunities for the young of the nation, wean the nation off fossil fuels, and deal with paramilitary units.
Tax evasion is thought to represent between 6 and 8% of GDP. The Colombian government can defend CBDCs by claiming that they will be compelled to pay taxes because they make it very difficult for people to hide their money.
Petro, 62, expressed interest in digital assets last year while running for office, saying that the nation should mine bitcoin using green energy rather than cocaine.
Reyes kept mute regarding the features of the virtual currency or how it will work with the country’s established payment mechanisms.
Additional rules that are now being thought about would complement the introduction of digital currency. One of these controls is limiting cash payments beyond a certain amount. Reyes estimates that this amount will be 10 million Colombian pesos, or about $2,400. These changes, however, might affect Colombians’ payment options.
Intriguingly, Hernando Vargas, technical deputy governor at the central bank of Colombia, has asserted that one of the major advantages of using CBDCs is their ability to address the threat posed by cryptocurrencies. He thinks that, despite the overwhelming evidence from El Salvador, Bitcoin and stablecoins are nearly impossible to tax.
Not only Colombia but other nations also intend to release CBDCs. In reality, if they haven’t already, the majority of nations have declared their intentions to disclose CBDCs.
The primary technology organization in Colombia, the Ministry of Information Technologies and Communications, recently developed a plan explaining how blockchain should be included in initiatives that address issues at the state and federal levels.
However, it is a serious concern that if an administration has the authority to supervise every expense made by its citizens, to instantly tax and fine them, and to limit when and where particular people would spend money based on their “social credit,” then we are on the verge of a very different unprecedented future.
