Posted on: August 18, 2022, 10:14 a.m.
Last update on: August 18, 2022, 10:48 a.m.
The Colombian government plans to launch its own national cryptocurrency, which could bring changes to the gambling industry.
Currently Colombia does not recognize cryptocurrency as a valid offer and it is not permitted for gambling. However, radical reforms could soften the government’s position.
The purpose of a national cryptocurrency, such as a central bank digital currency (CBDC), is to reduce tax evasion in the country. That’s according to Luis Carlos Reyes, who heads Colombia’s tax administration.
Digital currency gains another ally
Reyes explained the initiative in a recent interview with a media outlet. Week. He explained that the goal is to offer a solution to facilitate transactions for consumers. At the same time, it could help reduce tax losses due to tax evasion.
Petro has already shown its support for cryptocurrencies. Part of his campaign platform included a promise to do whatever is necessary to eliminate tax evasion. He also hinted at the possibility of welcoming crypto miners to the country.
The government is only beginning to consider the introduction of a cryptocurrency. However, he is convinced that a solution is coming. Additionally, other countries, such as China, Venezuela, and many others, have gone down the CBDC route.
Others, like El Salvador, have chosen to make bitcoin (BTC) legal tender. Mexico, Argentina, and a few other Latin American countries are also considering how to approach digital currencies.
Dr. Michael Muscat, a partner at Helix Partners and Igamingcolombia.com, confirmed Colombia’s cryptocurrency intentions to Casino.org. Further, he added that “iGaming regulation has resulted in payment providers and other technology incentives requiring regulation.”
In addition to the potential for a CBDC, the most likely route Colombia would take, Colombia is testing the feasibility of crypto in retail. Some banks in the country have piloted a program through which a limited number of consumers can use digital currencies to make purchases.
Also, a bill is in place to start forming the regulatory structure of the crypto industry. The rules, now open for public comment, set out guidelines to combat money laundering risks and ways to trace all transactions.
There is no guarantee that Colombia will decide to adopt BTC or other cryptocurrencies. Moreover, no government official has indicated how the approval could impact the gambling space. However, the country has opened the door to the possibility.
CBDCs remain a contentious topic
More than ever, the focus is on CBDCs. From a government perspective, this is a definitive way to embrace digital currency while ensuring that it still controls the financial activity of countries.
However, cryptocurrency proponents generally reject CBDCs. Digital currencies are, by design, decentralized without autonomous control. However, governments have complete and centralized control over state-sponsored digital currencies.
In effect, this means that governments have greater control over money than they currently do with fiat paper. For example, they can monitor all transactions on the blockchain and record movements for tax purposes.
Additionally, they can also easily disable access to individual or multiple accounts at once. If they sense that someone is conducting illicit activity or has not paid their taxes, governments can withdraw funds with just a few clicks in a CBDC environment.
Petro said Colombia loses around 6-8% of its potential GDP to tax evasion. Launching a CBDC is a way to recoup some of those losses. In 2020, total GDP was $271.3 billion, according to the World Bank. In other words, a significant amount slips through the cracks.
The arrival of COVID-19 has also pushed the digital agenda, according to Muscat. Where Colombia previously had a cash-based economy, more and more people sought alternative payment methods and turned to banks.
As a result, the government has shown its support for cryptocurrencies. This means that it is possible for BTC and a CBDC to co-exist in the country, as well as in the gaming ecosystem. However, when this might happen is open to discussion.