Kenya eyes taxing crypto transactions amid market meltdown

The government in Kenya, where about 8.5% of the population owns cryptocurrencies, has drafted a bill to tax crypto transactions in all exchanges in the country, even as the global crypto market undergoes a mass meltdown.

The Capital Markets (Amendment) Bill, 2022 would allow for the taxation of crypto exchanges, digital wallets and transactions. Crypto investors in Kenya would have to pay capital gains tax to the Kenya Revenue Authority when they sell or use their crypto in a transaction. More precisely, the 20% excise tax on every crypto transaction fee is wisely seen as an ineffective strategy by the new government to reduce foreign borrowing by expanding the domestic tax net. The bill would also require investors to inform the Capital Markets Authority, the government’s financial regulator, on the details of their crypto ownership. Roughly 8.5% of the country’s population, or 4.25 million people, own cryptocurrencies.

“The amendment will provide for specific provisions to govern digital currency transactions in Kenya, including the definition of digital currencies, its creation through crypto mining and provide for regulations around trading of digital currencies,” said the bill sponsor, Mosop MP Abraham Kirwa.

By introducing the law, Kenya, whose central bank has been cautioning citizens against the use and trade of crypto, will be following in the footsteps of Ethiopia, which first banned crypto before regulating it. But the news have not been a welcome message for majority of Kenyan crypto optimists, who have burned their fingers in the crypto market meltdown earlier this year and are now unable to withdraw their balances in the recent FTX collapse.