taxes on revenues earned by crypto exchanges utilized by around 4 million residents.
The country's Treasury Cabinet Secretary, Njuguna Ndung'u, published new regulations that require global crypto exchanges to pay a 1.5% digital tax service on earnings. The tax was initially proposed in 2020 as a way to extract revenue from leading crypto exchanges and tax-avoiding digital asset platforms.
The new regulations provide for the taxation of "taxable electronic, internet or digital marketplace supply" which includes the "facilitation of online payment for, exchange, or transfer of digital assets." The Kenyan government is expected to generate $45.5 million (5 billion Kenyan shillings) in revenue from this tax, according to the Kenya Revenue Authority (KRA).
Kenya has one of the highest proportions of the population owning cryptocurrencies in Africa, along with Nigeria and South Africa. However, the Central Bank of Kenya (CBK) has warned residents against dealing with crypto assets like Bitcoin, stating that they are not recognized as legal tender in the country.
Despite warnings from the Central Bank of Kenya, the acquisition and trading of cryptocurrencies by Kenyan residents continue to rise, prompting the government to explore taxation methods for crypto transactions. This move reflects a global trend as tax authorities and governments aim to regulate the crypto market and generate revenue from it.
This move by Kenya's Treasury Cabinet Secretary is expected to bring more transparency to the country's cryptocurrency market and provide a level playing field for all market players. It is also seen as a positive step towards the recognition of cryptocurrencies as a legitimate asset class in the country.
As the crypto market continues to grow, it is likely that more countries will follow in Kenya's footsteps and impose taxes on digital assets. However, this may also lead to increased scrutiny and regulation, which could have both positive and negative implications for the market and its users.
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