The country’s first effort at crypto regulation amends the country’s Capital Markets Law to define crypto as a security and establish reporting, tax and other requirements.
An amendment was introduced to the Kenyan law in capital markets on Nov. 21 that would require those who own or deal in cryptocurrencies to provide the country’s Capital Markets Authority with information on their activities for tax purposes, local media report. This is the first time Kenya has extended financial regulation to cryptocurrency.
Under the Capital Markets (Amendment) Bill, Kenyans would pay capital gains taxes to the Kenyan Revenue Authority when they sell or use digital currencies. Cryptocurrency held for less than a year would be subject to income tax, while after that capital gains tax would apply. Kenya has an income tax that ranges from 10% to 30%. Banks already charge an excise duty of 20% on all commissions and fees on crypto trades.
The Kenya Revenue Authority (KRA) will go after the more than 4M Kenyans who own #crypto, if MPs approve changes to the Capital Markets (Amendment) Bill, 2022, aimed at regulating and taxing the fast-growing digital currency trade. pic.twitter.com/LRlAgPJucJ
— Njeru’s Updates (@NjerusUpdates) November 21, 2022
Author of the bill MP Abraham Kirwa said:
“The amendment will provide for […] the definition of digital currencies, its creation through crypto mining and provide for regulations around trading of digital currencies. […] The amendment will also outline responsibilities of persons or businesses trading in digital currencies, provide for its taxation, ownership and provide for promotion of innovation in this area.”
The bill would define digital currencies as securities, provide for the licensing of individual crypto traders and create a centralized electronic register of transactions in digital currencies in the country. It would also institute consumer protection measures, such as by creating a fund “to protect investors from financial loss arising from the failure of a licenced broker or dealer” and privacy guarantees.
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A Chainalysis survey released in September ranked Kenya 19th worldwide in cryptocurrency adoption and fifth in peer-to-peer trading. The proposed amendment comes simultaneously with a call by Kenyan President William Ruto to double the country’s tax base. The country has about 4 million cryptocurrency users. At about 8.5% of the population, that gives Kenya the world’s fifth highest rate of ownership.