The plan for the digital currency was revealed through a statement given by Luis Carlos Reyes, who is the head of the Colombian tax authority DIAN. The move comes amid a move by many countries towards digitizing their economies to better understand and control the flow of money.
According to Reyes, this would be one of the proposals of the newly inaugurated president Gustavo Petro to curb tax evasion which is currently estimated to be between 6% and 8% of Colombian GDP. In essence, the digital currency will enhance the traceability of merchants’’ transactions to ensure that they do not evade taxes.
Cash payments restrictions
Among the other measures expected to follow the introduction of the digital currency is the restriction of cash payments over $2,400 (10 million Colombian pesos).
While the government is focused on curbing tax evasion, the changes might disrupt the payment channels of a majority of Colombians, especially after the cash crunch caused by the Covid-19 pandemic. Colombians are also currently dependent on cash transactions and shifting to digital payments could be difficult.
According to data from the Financial Superintendency, Colombians prefer cash as their main means of payment method for groceries and transportation.
But the Central Bank of Colombia has shown that the circulation of bills has shot to the heist level in the past seventeen months.
