Colombia eyes central bank digital currency adoption to fight tax evasion

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Colombian National Directorate of Taxes and Customs (also Dirección de Impuestos y Aduanas Nacionales de Colombia or DIAN) director Luis Carlos Reyes has revealed that the South American country may issue its own central bank digital currency (CBDC).

In an interview with local news outlet Semana magazine, Reyes discussed the monetary policy plans of Colombian President-elect Gustavo Petro, which include the CBDC adoption to ease consumer transactions and fight tax evasion.

“This is important to improve the traceability of payments made in the economy… When cash transactions are not recorded anywhere, it is easier to make sales that are not recorded, and therefore people who must pay VAT or income tax on those transactions can avoid them,” he said. 

Semana notes that the interview is the first time any official in the President Petro-led administration, which took over the country’s reins this month, is speaking up about the CBDC. During his campaigns last year, Petro stated that Colombia would mine Bitcoin with renewable energy if he were to be elected. 

Colombia will join other Latin American countries already exploring CBDCs, including Brazil, Mexico, and Venezuela. According to the Bank for International Settlements (BIS), these countries plan to launch their CBDCs in the next few years. 

Colombia and digital assets adoption 

The tax agency has been cracking down on digital assets tax evaders despite the lack of a clear regulatory framework for the market. Earlier this year, the DIAN began enforcement actions against digital asset investors who omitted or inaccurately filed Income and Complementary Taxes from their earnings. 

Colombia is one of the leaders in digital assets adoption in the region and globally. The rising popularity of the asset class has seen the country’s financial regulator, the Financial Superintendence of Colombia (also Superintendencia Financiera de Colombia or SFC), propose new laws to guide the relationship between virtual assets service providers and banks. 

The proposal stipulates that banks can only provide banking services for Virtual Asset Service Providers (VASPs) registered under the Online Reporting System, have put KYC/AML/CFT (Know Your Customer/Anti-money laundering/Combating the Financing of Terrorism) measures in place, and have the operational and technical capacity to monitor and report transactions to the central bank.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: The BSV Global Blockchain Convention panel, The Future of Financial Services on Blockchain: More Efficiency & Inclusion