Down in Bogotá, cryptocurrency adoption is raging on. Colombia’s tax authority, the DIAN, (Dirección de Impuestos y Aduanas Nacionales de Colombia) has begun to catch up. It seeks to take “special measures” to crack the whip on cryptocurrency tax avoiders.
In a statement released on January 28th, the DIAN stated that it would attempt to better regulate the cryptocurrency space, to work toward a more “honest” Colombia. The statement admits that Bitcoin (BTC) and cryptocurrency use is growing worldwide:
“Currently, operations with crypto assets are a reality worldwide and with the boom in the use of so-called virtual currencies or cryptocurrencies, the DIAN has initiated actions aimed at to control the taxpayers who carry out operations with them.”
In effect, the DIAN wishes to establish a framework that would establish a tax control for “omitted” or “inaccurate” taxpayers. That includes Colombian citizens who failed to record income obtained from crypto operations, or those recording inaccurate cryptocurrency activities.
It comes as little surprise as Colombia is an increasingly active country for Bitcoin and crypto adoption. Colombia is consistently the second most active Bitcoin trading country in Latin America according to usefultulips.org, an online service tracking peer-to-peer BTC trading across the world.
Meanwhile, a search on Coinmap shows hundreds of merchants and ATMs across the country for Bitcoin services. Indeed, according to the Venezuelan newspaper El Nacional, there are 687 Bitcoin-friendly retailers in Colombia.
While hardcore crypto libertarians may roll their eyes at the tax authorities attempting to regulate the space, the move may in fact be encouraging for greater crypto adoption. Recent news, as well as the DIAN’s approach to regulation, would suggest that Colombia’s institutions are in fact warming to crypto.
Currently, Colombia’s laws dictate that its financial institutions are prohibited from protecting, investing, brokering, or managing cryptocurrency operations. However, Colombian citizens can invest, and some legacy financial institutions are paving the way for greater adoption of cryptocurrencies in the country known as the “gateway to South America.”
In March last year, one of Colombia’s oldest banks, Banco de Bogotá, surprised incumbents, announcing it would explore crypto-related services as part of a regulatory sandbox project. The Winklevoss twins’ Gemini trading firm has since partnered with a rival bank, Bancolombia, for clients to trade four crypto assets: Bitcoin, Ether (ETH), Litecoin (LTC) and Bitcoin Cash (BCH).
It would appear the Colombian government consents to crypto, launching a game that teaches young people how to invest in the stock market and cryptocurrencies in September 2021.
Related: Volatility, hyperinflation and uncertainty: How everyday Venezuelans are using stablecoins to protect their livelihoods
Nonetheless, before jumping to conclusions that Colombia may become the next Latin American country to adopt Bitcoin as legal tender, understand that the DIAN’s efforts are simply an attempt to fight tax evasion.
The country will need to up its user numbers, trading volumes and win over more government ministers before such a move could take place.