Kenya has lately revealed its intention to regulate the cryptocurrency industry by emphasizing taxing digital currency transactions as the sector grows.
It would be possible to tax cryptocurrency exchanges, digital wallets, and transactions under the Capital Markets (Amendment) Bill, 2022. This tax will be similar to a 20% excise charge levied by banks on all commissions and fees on cryptocurrency trading.
If authorized by Parliament, Kenyan crypto investors would be required to pay capital gains tax to the Kenya Revenue Authority whenever they sell or use their crypto in a transaction. If cryptocurrency is held for less than a year, it will be subject to income tax (10% to 30%), and if it is held for more than a year, capital gains tax will be applied. The bill would also mandate that investors disclose key information about their cryptocurrency ownership to the Capital Markets Authority, the government’s financial regulator.
The proposed bill would designate digital currencies as securities, allow for the registration of individual cryptocurrency traders, and create a centralized computerized registry of all digital currency transactions. A fund would be established to safeguard investors from financial loss originating from the collapse of a licensed broker or dealer, and privacy guarantees would be implemented as additional consumer protection measures.
Kenya, whose central bank has warned residents against cryptocurrency usage and trading, will follow in the footsteps of Ethiopia, which banned cryptocurrency before regulating it.
Many Kenyan crypto traders are outraged by the government’s latest move. After witnessing a loss in cryptocurrency earlier this year and being unable to withdraw their balances following the recent FTX collapse, most Kenyan crypto pundits did not find the news welcoming.
Kenya has the largest proportion of crypto-owning citizens in Africa. Ukraine, Russia, Venezuela, and Singapore are the only four nations, according to the United Nations Conference on Trade and Development (UNCTAD), whose residents hold more cryptocurrency than Kenya. However, the nation’s crypto community may begin to dwindle in the coming months due to eroding investor confidence in the sector, which has seen over US$2 trillion wiped off the market globally this year.