After recording an upbeat economic growth in the second quarter, Colombia plans to create a digital currency to prevent illicit financial activity like tax evasion. This will be part of the country’s new monetary policy measures. It’s aimed at increasing the transparency of financial transactions.
Luis Carlos Reyes, the head of the Colombian Tax and Customs National Authority, believes the potential digital currency would be of major benefit to user experience. He said it would make transactions easier for the consumer. However, Reyes did not specify what kind of digital currency the Colombian government is looking to launch. It could either be a central bank digital currency (CBDC) or an asset-backed national currency like Venezuela’s Petro digital currency project.
Hernando Vargas, the technical deputy governor at the central bank of Colombia, had noted the implications of retail CBDC in the country. He said cash is the preferred instrument of low-cost payments in Colombia, as there are potential threats from cryptocurrencies and stablecoins in certain circumstances. Vargas outlined that a line of defense against the widespread use of cryptocurrencies and stablecoins is weaker in Colombia than in other jurisdictions. He said the discussion about the adoption of a retail CBDC becomes interesting.
The concept of Colombia’s very own digital currency comes with the swearing-in of the new president Petro on August 7. He is a crypto enthusiast. Petro had suggested in 2017 that Bitcoin could remove power from the government and return it to the people. He described the virtual currency as pure information.