The Colombian government made plans to introduce a virtual currency public. This new currency would have several goals, including reducing tax evasion and improving the traceability of citizen transactions. Restrictions on cash payments and transactions worth more than 10 million Colombian pesos ($2,400) would also be included in the proposed measure.
To better understand and manage the flow of money in their economies, many nations are now looking to digitize a portion of their economies. According to statements made by Luis Carlos Reyes, the head of the DIAN, the Colombian tax authority, the government of Colombia intends to introduce its own digital currency soon.
This, according to Reyes, would be one of President Gustavo Petro’s proposals to reduce tax evasion, which is thought to account for between 6% and 8% of Colombia’s GDP. Reyes noted that the goal of this digital currency would be to improve the traceability of these transactions so that business owners cannot evade taxes by using cash as a medium of exchange.
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 did not disclose any traits of the digital currency or the way in which it would work alongside the traditional payment systems in the country.
In addition to the introduction of the digital currency, additional policies are also being considered. A limit on cash payments over a certain amount is one of these measures. This sum, according to Reyes, will be 10 million Colombian pesos, or roughly $2,400.
However, these modifications might interfere with Colombians’ payment methods. Cash is currently one of the primary means of payment in Colombia, despite the fact that use of cash for payments decreased during the Covid-19 pandemic. The Central Bank of Colombia’s statistics indicate that there are now more bills in circulation than there have been in the previous 17 months.
According to data from the Financial Superintendency, Colombians still prefer cash as their main payment method when paying for transportation (94%), groceries (80%), cell phone top-ups (78%), and rent (77%).