Colombia could introduce a central bank digital currency, the head of the country’s tax agency said yesterday.
Luis Carlos Reyes, director of the Colombian tax and customs agency, DIAN, ToldWeek Monday magazine that the new government of the South American nation would seek to create “a digital currency” that would facilitate “transactions for the consumer”.
A central bank digital currency (CBDC) is a digital version of a state’s fiat currency, such as the US dollar or euro, backed by a central bank.
This is the first time that the Colombian government has spoken of introducing one. Colombia’s new president, Gustavo Petro, took office on August 7.
A former guerrilla fighter and the country’s first leftist president, Petro campaigned on a ticket to fight corruption, improve opportunities for the country’s frustrated youth, wean the country off fossil fuels and negotiate with paramilitary groups.
He has also shown an interest in digital assets: Petro, 62, last year said while campaigning for the country to mine Bitcoin using renewable energy, instead of producing cocaine.
But a CBDC is very different from Bitcoin. CBDCs are centralized, unlike cryptocurrencies like Bitcoin. This means that a central power – the government – controls them. Privacy advocates have warned that they can allow the state to spy on citizens’ spending, as well as to exercise capital controls more easily.
Countries around the world are currently at different stages of researching and releasing CBDCs. With the exception of smaller Caribbean countries, such as the Bahamas, most major economies have yet to release one.
China, however, has already made its live digital yuan.
Colombia is becoming more crypto-friendly: Latin America’s fourth-largest economy last month published write rules for crypto companies that want to operate in the country.
And its big banks have in partnership with crypto exchanges – including Binance – in an experimental project that allows customers to buy small amounts of digital assets like Bitcoin and Ethereum through their largely traditional channels.
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