The finance planning committee of Kenya’s National Assembly has agreed to the proposed changes to the law that would enable crypto taxation.
The committee, chaired by Member of Parliament Kimani Kuria, endorsed a bill presented by colleague Kipsang Kirwa, aiming to amend the Capital Markets Act to include digital currencies within the definition of securities.
“This is a very critical law that will guard our country against proceeds of crime and terrorism financing. Cryptocurrencies are already being traded by millions of Kenyans, yet we have no law to govern it. We approve this bill for publication.”
“Cryptocurrency is the future. This will be the norm because we will buy and sell using cryptocurrencies. We should be on the frontline in adopting cryptocurrencies like we did with the M-Pesa. Right now, South Africa and Nigeria have legalized cryptocurrencies, yet our Central Bank is dragging its feet.”
- The bill will now move to the next stage, where members of parliament will discuss and propose any changes they think are needed. If the House approves the bill, it will be sent to the President for final approval.
- The Capital Markets (Amendment) Bill 2023 aims to increase taxation for crypto exchanges and digital wallets.
- It would impose transaction taxes like the duty charged on bank transactions, subjecting individuals in cryptocurrency transactions to these taxes.
- If the bill is approved, Kenyans must pay capital gains taxes to the Kenya Revenue Authority (KRA) when they sell or use digital currencies in transactions.
What you should know
- Kirwa’s bill proposed to put blockchain, cryptocurrencies, and digital currencies under the purview of Kenya’s Capital Markets Authority.
- The bill would amend existing laws to include definitions for these emerging asset classes and expand the definition of securities.
- It also sets the requirements for introducing cryptocurrencies to the market and imposes obligations on licensed traders.
- The Kenyan financial regulatory landscape continues to grapple with the evolving nature of cryptocurrencies and other digital assets.
- In 2022, the Kenyan Financial Sector Regulators (FSR) agreed to consider forming a group to develop guidelines for regulating digital assets. However, the group did not reach a definitive resolution, and no further updates have been issued.
- Amidst this uncertainty, the National Assembly’s financial planning committee recently tasked the Blockchain Association of Kenya (BAK) with drafting a bill for a virtual asset service provider.
- The recent crypto taxation development raises questions about its potential overlap with BAK’s ongoing efforts.
- BAK did not respond to our inquiries as of the time of writing.
Why it matters
- According to Chainalysis’s 2023 Geography of Cryptocurrency Report, Kenya is ranked 21st for crypto adoption globally.
- Kenya stands out as East Africa’s most prominent cryptocurrency market, boasting significant volume and interest, even though volumes temporarily dipped to $10 billion between July 2022 and June 2023.
- But until recently, when the government introduced crypto taxes, the relatively new asset class was not officially recognized in Kenya. The Interior Cabinet Secretary Kindiki Kithure pushed for a ban earlier this year.
- The digital asset tax (DAT), imposing a 3% tax on digital asset trading, faces opposition from the Kenyan cryptocurrency community.
- The Blockchain Association of Kenya (BAK) has filed a petition challenging the legality of the Digital Asset Tax (DAT).