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The government of Colombia revealed that it has plans to launch a digital currency. One of the purposes of this new currency would be to curb tax evasion and improve the traceability of transactions made by citizens. The proposed measure would also be accompanied by restrictions on cash payments and transactions over 10 million Colombian pesos ($2,400).
Many countries are now looking to digitize parts of their economies to better understand and control the flow of money in their economies. The government of Colombia plans to launch its own digital currency in the near future, according to statements made by Luis Carlos Reyes, head of DIAN, the Colombian tax authority.
Reyes told local news agency Semana that this would be one of the proposals of newly installed President Gustavo Petro to curb tax evasion, estimated to be between 6% and 8% of GDP in Colombia. On this note, Reyes stated that the purpose of this digital currency would be to improve the traceability of these transactions so that sellers cannot evade taxes by using cash as a payment method.
On the effectiveness of the measure, Reyes estimated:
This corresponds to six or eight tax reforms that have been carried out in the country, with which a maximum of 1% or 1.5% of GDP is achieved.
However, Reyes did not reveal any features of the digital currency or the way it would work alongside the traditional payment systems in the country.
The introduction of the digital currency will also be accompanied by other measures which are currently being investigated. One of these measures is a restriction on payments in cash above a certain amount. Reyes confirmed that this amount would be 10 million Colombian pesos, or about $2,400.
However, these changes may disrupt the payment channels of Colombians. While the use of cash for payments decreased during the Covid-19 pandemic, cash is currently one of the most important means of payment in Colombia. Statistics from the Central Bank of Colombia show that the circulation of banknotes has risen to the highest number in 17 months.
According to data from the Financial Superintendency, Colombians still prefer cash as the main payment method when paying for transport (94%), groceries (80%), mobile phone top-ups (78%) and rent (77%).
What do you think of the proposal for a digital currency in Colombia and the proposed restrictions on cash payments? Tell us in the comments section below.
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