Kenya Debates New Crypto Tax Bill

Lawmakers in Kenya are debating the Capital Markets (Amendment) Bill 2022 which seeks to introduce crypto taxation on crypto exchanges, digital wallets and individual transactions. Local publication Business Daily reports that a bill sponsored by MP Abraham Kirwa is seeking to introduce a 20% excise tax on every cryptocurrency transaction executed in the country.

According to the Bill, if a person holds digital currency for under a year, they will be required to pay an income tax, but if the period exceeds 12 months, the capital gains tax will apply instead.

The new bill comes almost two years after Kenya came up with the Digital Service Tax (DST) as part of the country’s Finance Act 2020. DST became effective in January 2021 and introduced a 1.5% tax on services including cryptocurrency transactions executed via digital marketplaces.

Meanwhile, Kenya’s proposed plan to amend its capital markets law to introduce crypto taxation comes five months after the United Nations Conference on Trade and Development (UNCTAD) called on developing countries to ensure comprehensive financial regulation by mandating the registration of crypto exchanges and digital wallets.

Additionally, UNCTAD asked that developing countries make the use of cryptocurrencies less attractive “by charging entry fees for crypto exchanges and digital wallets and/or imposing financial transaction taxes on cryptocurrency trading.” This is even as a recent UNCTAD report notes that Kenya with 4.25 million people or 8.5% of its population involved in cryptocurrencies has the highest crypto adoption rate in Africa.

Africa and Crypto Regulation

According to the Chainalysis 2021 Global Crypto Adoption Index, Kenya, South Africa and Nigeria rank among the top 10 countries in the world in terms of cryptocurrency use. On top of that, Africa is the fastest-growing cryptocurrency market among developing economies and the third-largest growing market in the world.

In April, the Central African Republic, one of the world’s poorest countries with decades-long conflicts, announced that it was adopting Bitcoin (BTC) as legal tender. However, not all countries in the continent are open to cryptocurrency use. While 4 African countries, Algeria, Egypt, Morocco and Tunisia, have placed an absolute ban on cryptocurrency, 19 countries, including Nigeria, Africa’s largest economy, have placed implicit restrictions on digital assets.