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A report suggests Colombia will use digital currency to combat tax evasion

According to a tax and customs official, Colombia’s economy grew faster than projected in the second quarter.

As per Luis Carlos Reyes, the director of Colombia’s Tax and Customs National Authority, President Gustavo Petro’s administration is working on a digital currency that will curb illegal financial activities like tax evasion.

According to a local magazine Semana interview, officials in Colombia intend to increase financial transaction transparency with digital currencies. According to the analysis, approximately 6% to 8% of Colombia’s GDP is expected to be lost to tax evasion.

Will anything else change?

There is still some uncertainty about whether the Colombian government intends to introduce a central bank digital currency (CBDC) or a national asset-backed currency.

In early 2022, Colombia’s central bank technical deputy governor, Hernando Vargas, will study the consequences of a retail CBDC. According to the official, cash is Colombia’s preferred low-cost payment method, implying that cryptocurrencies and stablecoins could pose a threat in certain situations.

“Columbia has a weaker line of defense against cryptocurrency and stablecoin use than other jurisdictions, making the debate over a retail CBDC that much more fascinating.”

Bitcoin’s long history in Colombia

Only days after Juan Manuel Santos was sworn in as Colombia’s new president, the announcement came as a surprise. Bitcoin (BTC) is one of the cryptocurrencies Petro has previously supported. The Bitcoin currency has the potential to dethrone the government and give the people back their power, Petro said in 2017. The idea of virtual money is based on pure information, so it is also based on energy.

In the second quarter, Colombia’s economy outperformed forecasts, boosting Petro’s administration with a growth rate of 12.6% compared with 12.1%.