Kenya is ramping up its efforts to tax cryptocurrency transactions by integrating a real-time tax system with crypto exchanges. This move by the Kenya Revenue Authority (KRA) aims to boost crypto adoption while capturing revenue from the country’s growing crypto market. With an estimated four million crypto users, Kenya ranks among the top African nations in cryptocurrency adoption.
KRA reported that in 2022, crypto transactions in Kenya reached a staggering $18.6 billion (KES 2.4 trillion). This surpassed that of even some commercial banks. Despite this, the agency has struggled to tax these transactions due to its outdated systems. The new tax system will allow KRA to monitor real-time data from cryptocurrency exchanges. This upgrade is part of KRA’s broader plan to modernize tax collection for the financial year 2024/25.
Kenyan regulators, including the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA), have yet to fully regulate the crypto sector, but the market continues to thrive. Platforms like Binance and Coinbase have been popular, although many crypto users in Kenya prefer peer-to-peer (P2P) transactions to bypass regulatory oversight. Most of these transactions occur through mobile money platforms, making it challenging for KRA to track and tax earnings.
To address this, KRA emphasized that income from crypto transactions is taxable under section 3 of Kenya’s Income Tax Act. The authority plans to establish a more efficient system to ensure it can collect taxes from this booming market. KRA officials also acknowledged the challenges posed by the unregulated nature of the crypto space. However, they are determined to close the loopholes that have resulted in significant revenue losses for the government.
KRA sees it as essential to track and tax crypto transactions with the growing potential of crypto. However, the lack of clear legal status for crypto exchanges in Kenya complicates KRA’s integration efforts. In 2023, a bill proposing amendments to the Capital Markets Act was introduced in the National Assembly, aiming to impose capital gains tax on exchanges and excise duties on transactions. The bill, which was approved by the finance committee, remains under consideration in the National Assembly.
