The Colombian tax authority is tightening its measures against tax evasion related to bitcoin and cryptocurrencies amid the growing adoption of cryptocurrencies.
Cryptocurrency adoption is accelerating in Bogotá. Colombia’s tax authority, DIAN, (Dirección de Impuestos y Aduanas Nacionales de Colombia) is trying to catch up. He seeks to take “special measures”, to hit those who earn income from cryptocurrencies, but dodge taxes.
In a statement released on Jan. 28, DIAN said it will try to better regulate the crypto sector in order to work towards a more “honest” Colombia. The statement acknowledges that the use of bitcoin (BTC) and cryptocurrencies is growing worldwide:
“Crypto-asset transactions have now become a reality around the world, and due to the boom in the use of so-called virtual currencies or cryptocurrencies, DIAN has initiated actions aimed at controlling the taxpayers who transact with them.”
Essentially, DIAN wants to create a structure that would impose tax controls on “overlooked” or “inaccurate” taxpayers. This includes Colombian citizens who have not registered income generated from cryptocurrency transactions or those who record inaccurate cryptocurrency transactions.
This is not surprising as Colombia is becoming an increasingly active country in accepting bitcoin and cryptocurrencies. According to tulips.org, an online service that tracks peer-to-peer bitcoin trading around the world, Colombia consistently ranks as the second most active cryptocurrency trading country in Latin America.
Meanwhile, a search on Coinmap shows hundreds of merchants and ATMs across the country for Bitcoin network services. Indeed, there are 687 retailers in Colombia that support bitcoin transactions, according to the Venezuelan newspaper El Nacional.
While ardent crypto-libertarians may be rolling their eyes at the actions of the tax authorities trying to regulate the industry, in fact, this move could encourage wider adoption of cryptocurrencies. Recent news, as well as DIAN’s approach to regulation, suggests that Colombian institutions are actually sympathetic to crypto.
Currently, Colombian laws dictate that its financial institutions are prohibited from using to protect, invest, broker, or manage cryptocurrency transactions. However, Colombian citizens can invest, and some traditional financial institutions are paving the way for greater adoption of cryptocurrencies in the country known as the “gateway to South America.”
Last March, one of Colombia’s oldest banks, Banco de Bogotá, surprised actors by announcing that it would be exploring cryptocurrency-related services as part of a regulatory sandbox project. Since then, the Winklevoss twins’ Gemini trading firm has partnered with rival bank Bancolombia to enable clients to trade four crypto assets: Bitcoin, Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).
The Colombian government appears to be becoming more crypto-friendly with the launch of a game in September 2021 that teaches young people how to invest in the stock market and cryptocurrencies.
However, before jumping to conclusions that Colombia could be the next Latin American country to accept bitcoin as legal tender, understand that DIAN’s efforts are simply an attempt to fight tax evasion.
The country will need to increase the number of users, trade volumes and involve more ministers in regulation before such a move can occur.