Kenya is considering passing its Capital Markets (Amendment) Bill 2022, which would recognize cryptocurrencies as securities, and see a crypto taxation structure similar to a bank’s excise duty on transactions.
It is Kenya’s first attempt at addressing crypto regulation at this level. The proposed bill would affect close to 4.3 million Kenyans that hold cryptocurrencies, a United Nations Conference on Trade and Development (UNCTAD) policy report suggested.
According to UNCTAD’s data back in June, Kenya was home to the population with the highest cryptocurrency possession rates throughout all of Africa, and ranks it fifth on a global scale.
If the bill passes, Kenyan crypto holders will be mandated to pay the Kenyan Revenue Authority (KRA) a capital gains tax when they sell or use cryptocurrencies.
This tax will be applied only for crypto that’s been held for more than a year, with a regular income tax to be exercised before that.
The proposed 20% excise duty is identical to that of banks’ commission and crypto trade fees, but the income tax in the country is at 30% – that’s both for personal, as well as corporate income taxes.
Kenya’s Digital Service Tax (DST) was introduced in January, 2021, and it was the first attempt at implementing a tax on digital services, including crypto transactions, setting the rate at 1.5%.
UNCTAD’s policy report from June had called for developing countries to establish more comprehensive financial regulation, Kenya included, and this latest move to amend the country’s capital markets law is a step in achieving that.
The bill is not aimed solely at recognizing crypto as securities, however. If passed, it would also provide the framework for the creation of a centralized electronic register to keep track of crypto transactions, as well as lay the groundwork for the licensing model for crypto traders in the country.
This would not only ensure a generally more comprehensive financial regulation of crypto exchanges and wallets, but also enable the implementation of consumer protection measures. The last part being extremely hotly debated lately amid FTX’s meltdown.
This puts Kenya in the conversation when it comes to the latest countries to implement regulatory crypto frameworks, with some eyeing 2023 as their first forays into crypto gambling regulation as well.
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