The Kenya Revenue Authority (KRA) is set to launch a new real-time tax system that will integrate with cryptocurrency exchanges, allowing the government to track crypto transactions and efficiently collect taxes.
Kenya, home to around four million cryptocurrency users, ranks among the top countries in Africa for crypto adoption. In 2022, the KRA reported that cryptocurrency transactions in the country reached approximately $18.6 billion (KES 2.4 trillion), exceeding the volumes handled by some commercial banks. With such significant activity, the government aims to capitalize on this growing sector by expanding its tax base.
In a strategic document outlining its tax plans for the 2024/25 financial year, KRA detailed that the new system would integrate with crypto exchanges and marketplaces to monitor transaction data. “The system will track details such as transaction date, time, type, and value,” the KRA explained.
Although Kenya’s cryptocurrency market remains largely unregulated by the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK), exchanges such as Binance and Coinbase have provided services to Kenyans.
Many local crypto users rely on peer-to-peer (P2P) transactions and mobile money payments to circumvent regulatory oversight. KRA admitted that its outdated tax system has been unable to effectively monitor and tax these transactions, resulting in substantial revenue losses for the government.
KRA highlighted that income from crypto trading falls under the tax provisions in Section 3 of Kenya’s Income Tax Act, and the new system is designed to address the gap. “The goal is to develop a robust and efficient system that will allow KRA to collect taxes on cryptocurrency transactions effectively and efficiently,” the agency added.
Despite the cryptocurrency market’s notorious volatility, it remains attractive to young Kenyans seeking quick profits. The rise in crypto adoption is also fueled by factors such as low transaction costs, faster transfer times, and widespread internet access.
Additionally, according to blockchain analytics firm Chainalysis, many Kenyans use cryptocurrency to preserve savings, facilitate commercial transactions, and send remittances, particularly to Europe and the US.
“With this growing potential, it is crucial for KRA to implement a system that can track and collect taxes on cryptocurrency transactions,” the agency emphasized.
However, challenges remain. The uncertain legal status of crypto exchanges in Kenya may hinder KRA’s efforts to effectively integrate its tax system with these platforms.
In 2023, a proposed amendment to the Capital Markets Act sought to introduce a capital gains tax on crypto exchanges and an excise duty on crypto transactions. Although approved by the finance committee, the bill is still under consideration in the National Assembly.
As Kenya’s digital economy expands, the KRA is poised to implement strategies to ensure that this rapidly growing sector contributes to the national tax revenue.