The Lower Eastern Times Opening The Third Eye
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Kenya has earned Sh10 billion in revenue from taxing digital assets over the past financial year, a success highlighted by former KRA chair Anthony Mwaura.
However, industry experts are raising red flags over the potential long-term impact of the current tax structure on the country’s digital asset ecosystem.
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The 1.5% Digital Asset Tax introduced under the Finance Act 2023 is being criticized for its broad and unclear application. It taxes all crypto transactions — from speculative trading and stablecoins to simple wallet-to-wallet transfers — under a single rule, without accounting for the diverse nature of these activities.
Industry players argue that while taxation is necessary, the current approach risks stifling innovation, scaring off investment, and pushing credible platforms out of Kenya.
“The issue isn’t tax—it’s how the tax is being applied,” said Larry Cooke, Legal Counsel for Binance Africa. “Applying blanket taxes to all crypto activity doesn’t work and will drive away innovation.”
Under the current law, crypto platforms are required to calculate, convert, and remit taxes within five days for every transaction. Experts say this is not only technically burdensome for global exchanges, but nearly impossible for smaller local startups.
“There’s confusion around what constitutes a taxable event, who owes the tax, and how to implement it,” said Allan Kakai, Legal Chief at Steakhouse Financial. “Without clarity, companies will either overcomply or exit the market—both outcomes hurt growth.”
To address these issues, the industry is calling for a simpler framework that focuses taxation only at entry and exit points—when converting between crypto and fiat currency. They say this would encourage compliance while reducing administrative burdens.
“If the tax regime is clear and practical, compliance will rise,” said Cooke. “But taxing wallet transfers or tracking asset value in real-time isn’t sustainable.”
These concerns are surfacing just ahead of the second reading of the Virtual Assets and VASP Bill in Parliament, scheduled for June 2025. While the Bill seeks to establish a broader regulatory foundation for the crypto space, stakeholders insist the tax details must be reasonable and enforceable.
Binance, one of the world’s largest exchanges, says it is complying with all Kenyan requirements and is working with regulators to improve the system.
“Kenya has a vibrant crypto scene and the potential to lead in digital regulation,” Cooke added. “But innovation needs smart rules that match real-world practices.”
The industry is urging government agencies to collaborate with tech firms, legal experts, and civil society to develop a more effective, future-ready crypto tax model.
