Many Americans have been moving abroad in recent years. One of the popular choices for relocation is Colombia. It’s the 2nd most bio-diverse country on the planet, next to neighboring Brazil. $1 USD converts to $5,000 Colombian Pesos; And the $5k is actually valuable. And it has A-class, modern cities such as Bogota, Medellin, Cali,, and more. Now, new President Gustavo Petro wants to push the Gateway to South America, a step further. The POTROC has the newly elected government discussing the development of a Central Bank Digital Currency (CBDC) and integrating cryptocurrency into Colombian society.
What is a CBDC?
CBDC means Central Bank Digital Currency.
This is a form of cryptos regulated and controlled by the government. It’s completely centralized, monitored, and distributed by the federal government of an individual country.
The Bahamas was the first country in the world to launch a CBDC. It is called the Sand Dollar and launched in October of 2020 — nearly years ago from today.
Since then, 8 other countries have issued a centrally governed digital country (see list).
Why Colombia Needs It
A CBDC has many benefits to offer the country nicknamed, The Gateway to South America.
- Save Colombians time at the Bank. Though the heart of Gran Colombia is ranked to have one of South America’s brightest future banking economies, today it’s easy to see the banks are super slow. There are endless lines at “los bancos’ in cities like Bogota. Why are the banks of Colombia slow? No answer can be found on Google but a CBDC token could cut down the time waste to nearly none — as clients , tellers, and bank managers would handle all business through computers. And the tracing of the movements of money would be seen in a click. In fact, automated technology would be able to handle some of the jobs that require humans today, making more banking tasks for clients instantaneous.
Cocaine & Drugs
- The tracing of a centralized currency, would ‘shake’ the drug trade a bit. While highly organized Colombian Cartels will invest money to find ways to move money, the average person looking to make a drug buy would not likely want to go through the complicated process of doding the government, to make a drug purchase. Many would not even understand how to do this. Drug buying, on a street level, would be more complicated.
The President Petro also agrees on this theory and believes the country should focus on dedicating more energy to an official digital currency than efforts to trifle cocaine:
- Colombia is an amazing country with great foods that neither Europe nor the United States has access to naturally. Many expats have relocated to the South American giant and millions more are thinking about it. A CBDC or crypto-adapted economy could seal the deal as it allows people to move money quickly and easily. There are already real estate companies like LaHaus which are testing cryptos in Colombia [example].
Using Rivers For Crypto-Mining Over Cocaine Trafficking
And the President is definitely pro-cryptocurrency. In less than 1 year he’s already spearheaded the topic and made the government members serving under his term, learn more about how Colombia can move forward with Cryptocurrency or in Spanish, cripto monedas.
And one of his biggest reasons is creating a solution for the gap in Colombia’s economy that would be created by eliminating the Cocaine trade.
On Twitter Petro Gustavo wrote, “¿Y qué tal que el litoral pacífico aprovechara las caídas de alta pendiente de los ríos de la cordillera occidental para producir toda la energía del litoral y reemplazar sustancias ilegales con la energía para las criptomonedas?”, escribió el colombiano en Twitter. Y agregó: “La moneda virtual es pura información y por tanto energía”.
In English, this translates to (layman’s version): Let’s use the Occidental Rivers [of Colombia] as a renewable energy source to mine Criptos and digital currency. Using the Rivers for this business can replace the Cocaine economy.’
The Cartels use the river system to transport drugs. If the government had more reason to use the water systems, it could discourage the transporters. But at the same time, there’s huge risk that it could create internal conflict; Wars against guerilla armies that currently have a truce with the Colombian government.
And the much bigger issue, Colombia would lose up to an estimated $12-billion-dollars a year business by disrupting cocaine. And some speculate those numbers could be higher.
The loss of such an income to a country with an annual GDP of just over $271-Billion annually, could create a devastating chain of events. That’s nearly 5% of the country’s Gross Domestic Product, or value of all goods and services sold in 2020. To lose that level of income would harm any country.
Bad Part: No Cash Transactions Over $10-Million COP
And one more benefit to CBDC is possibly helping catch tax dodgers. According to an interview with Luis Reyes on web publication Semana, the head of Colombia’s Tax and Customs Office believes a digital dollar would be able to aid the collection of taxes. A centralized digital money gives the government the ability to trace spending from all dwelling in the country of over 52-million; And that estimate is fairly low considering lack of information on all immigrants living in Colombia.
Reyes’ ideas of how to use CBDC to track citizens’ spending pairs with President Petro’s desire to ban large cash transactions. Gustavo’s pushing a tax perform program that would ban large transactions being done in cash.
An unprecedented move in most forward-thinking countries, President Petro wants to limit cash transactions to $10-Million Colombian pesos. Any transaction larger would need to be done in another method, easily traceable by the government.
Petro has not said the other form of payment would be a CBDC or cryptocurrency but that is the speculation by most. The Colombian Presidents raving about cryptos seem to agree with this theory.
BanColombia Opened The Door
Make no mistake, there will be push back if this rule is enacted. However, it does not mean Colombians don’t like decentralized money and finance.
A quick glance at Triple-A.io reveals that Colombia has over 3-million people using cryptocurrency today. And it’s rising towards 4% of the population quickly.
US-based Cryptocurrency exchange Gemini paired with BanColombia in December of 2021 to open the door to cripto-monedas to millions of Colombians. The deal marked the first time a bank open to the public allowed the trading of Bitcoin.
And the deal came after months of politicking between the Financial Superintendency of Colombia and 14 different cryptocurrency exchanges. The FSC gave 9 of those 14 clearance to work with BanColombia. And of those 9, Gemini was chosen.
“”We recently partnered with BanColombia to provide their customers with a seamless onramp to trade $BTC, $ETH, $LTC, and $BCH through the Gemini exchange! We’re excited to work closely with the Colombian crypto ecosystem and grow our presence in LATAM” tweeted Gemini on the deal.
Only Bitcoin, Ethereum, Litecoin, and Bitcoin Cash cryptocurrencies were approved for the program. And this was not enough for some.
Colombia’s Crypto Underground and USDT
Many Colombians are not fond of the limitations set by the government. There’s a belief by some that corruption is too rampant in the country’s political system to salvage. Others hope that new President Gustavo Petro will fix much of it.
In the meantime, cryptocurrency USDT has become in high demand in Colombia. Many are storing their Colombian pesos in the Tether stable coin to avoid the falling value of the Peso.
Currently $1 USD converts to $4,844 COP. Just 1 year ago, the conversion was only $4,700COP.
In layman’s terms, Colombians that stored their money in USDT in 2021, have made up to a 25% gain by using USDT cryptos like a savings account. It stopped the ‘bleeding’ that Colombians holding traditional bank notes have suffered.
This has caused a major underground for cold wallets and USDT in Colombia. Cold wallets have sold out in my place and some Colombians have been paying up to 5%, to get people to send them USDT.
There are even videos in some Telegram groups and underground forums where Colombians flash their fiat currency to attract more USDT sellers. The amounts flashed can range up to hundreds-of-millions of Colombian Pesos.
Regardless, Colombia’s a great country. No one’s debating that. And across the world governments, where corruption and social inequality has long been an issue, are finally seeing ‘the people’ fighting back. The control of currency is what kept many systems of oppression alive, and Cryptocurrency is giving those systems a push back like never before.
President Gustavo Petro is bringing many new ideologies to his home country, with a long history of fighting for global and local equality. How he uses cryptocurrencies will be a major highlight in his Presidential term or it could be a reason the country falls back into turmoil and unrest.
Cryptocurrency laws of Colombia could be one of the most impactful events in digital currency for the Western Hemisphere; A country where citizens tend to have strong reactions to laws that affect their natural rights to choose. The ills of centralization vs decentralization could be brought to the light by the country that made famous the line “Plata o Plomo.”