Kenya’s legislative body has recently proposed the Finance Bill 2023, which, if approved, would impose a tax on digital assets, including cryptocurrency and non-fungible tokens (NFTs). The bill proposes a 3% tax on the value of digital assets transferred, which would be collected and remitted to the Kenyan government by individuals or entities involved in these transfers. A provision is also included for NFTs, and unregistered exchanges would be required to register under the new tax system.
In addition to the digital asset tax, the bill proposes a 15% tax on income earned from the monetization of online content. Content creators who promote or advertise products and services through sponsorships, affiliate marketing, merchandise sales, and paid subscriptions, among other means, would be subject to this tax. Before the bill becomes law, it must undergo five rounds of scrutiny, including committee reviews and National Assembly reports, before final approval from the president.
The proposed digital asset tax has sparked divergent opinions online. Some Kenyan citizens regard the development as a positive one, as digital assets are now officially recognized in the country. However, this standpoint is contrary to the Central Bank of Kenya’s previous warnings against using cryptocurrency, even though an outright ban was never instituted.
Cryptocurrency Kenya, an advocacy group for crypto in the country, also supported the bill, but called for digital taxes to be applied universally to all digital transactions, rather than solely targeting crypto and NFTs. Indeed, they argue that this selective tax amounts to “targeted harassment” and point out that the proposed tax is higher than fees charged by exchanges like Binance, which has a 0.10% trading fee.
The bill’s introduction follows Kenya’s 2022 presidential election, where elected President William Ruto was seen as being more supportive of cryptocurrency than his opponent, Raila Odinga. Previous attempts to regulate crypto came in the form of amendments to capital market laws, requiring crypto-related activities to be reported to authorities.
While the latest proposal could be interpreted as a first step toward regulation of the crypto space in Kenya, it does not necessarily legitimize it. Other countries have pursued similar measures recently. According to a United Nations report, Kenya’s adoption rate for crypto is relatively high, with approximately 8.5% of the population, or 4.25 million people, owning cryptocurrencies.