As Kenya imposes a 1.5% tax on every crypto transaction, it threatens to disrupt Africa’s digital integration. It can also jeopardize the region’s fintech leadership, driving startups and talent abroad. The African Continental Free Trade Area (AfCFTA) sees 54 nations as a unified market incorporating digital assets. But new rules and regulations in different African countries threaten this vision of unity.
Kenya risks more than revenue with new crypto tax
With a revised 1.5% crypto transactions tax, the nation risks losing regional fintech leadership, startup businesses overseas, and fracturing Africa’s digital economy, along with undermining its crypto revenue.
It also pushes young African crypto users and tech enthusiasts to pursue unregulated platforms and informal channels. Many Kenyans, whose primary income is from trading cryptocurrency, are at risk of losing income. Freelancers who converted crypto into money to pay rent or school fees might lose their income.
It also threatens content creators, developers, stakers, validators, and NFT artists who use cryptocurrency assets as daily payment roots. The National Assembly Committee on Finance and National Planning suggests a fourth point path for adequate crypto tax regulation in Kenya.
Key highlights of the National Assembly Committee regarding tax
- Tax efficiency: Digital assets should be treated under existing property disposal rules to avoid double taxation rather than the customized tax of 1.5%. This also eases the daily utility of crypto assets.
- Balancing innovation and regulation: Kenya should open itself to blockchain experimentation– from carbon credits to stablecoins.
- Privacy compliance: Public audits and cryptographic proofs should be integrated to ensure customer privacy. With this approach, the privacy of the investors will not be compromised.
- Phased rollout: The national assembly committee suggests that Kenya should prioritize education and voluntary compensation. It will assist in building capacity before fully enforced.
What’s next? Upcoming bills under consideration
Besides crypto tax, Kenya is also considering the Virtual Asset Service Providers (VASPs) Bill 2025. The bill aims to strengthen existing regulations, such as anti-money laundering (AML) and countering the financing of terrorism (CFT), along with reducing illicit financial flows.
However, Kenya’s current draft framework lacks privacy-preserving mechanisms, risking citizen privacy. The bill has been questioned by parliament about the data privacy clause in the Finance Bill 2025.
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FAQs
In Kenya, a 1.5% tax is imposed on every crypto transaction, which applies to transfers and exchanges regardless of whether a gain is made. This is a revised rate from an earlier 3%.
While cryptocurrency is not explicitly banned in Kenya, it is also not recognized as legal tender. The Central Bank of Kenya has historically issued warnings about its risks. However, Kenya is currently moving towards establishing a comprehensive legal and regulatory framework for digital assets, including the Virtual Asset Service Providers (VASPs) Bill 2025. This indicates a shift towards formalizing its use.
