Kenya’s bold initiative to tax digital assets has generated a significant boost to government revenue, bringing in Sh10 billion over the past financial year—a milestone highlighted by former KRA chair Anthony Mwaura.
However, beneath this financial success, concerns are growing within the crypto industry. Stakeholders caution that the current tax framework, introduced through the Finance Act 2023, risks hindering innovation, deterring investment, and pushing credible crypto platforms out of the Kenyan market.
The 1.5% Digital Asset Tax, intended to regulate a fast-growing sector, has raised alarm due to its broad application. It taxes everything from speculative tokens and stablecoins to simple wallet-to-wallet transfers under one sweeping policy, failing to differentiate between distinct types of digital transactions.
Consequently, industry experts are calling on policymakers to reconsider the legislation and develop clearer, more targeted regulations that foster industry growth while protecting consumers and the broader economy.
“The challenge is not taxation itself. It’s about taxing the right things, at the right time, in a way that makes sense,” said Larry Cooke, Legal Counsel for Binance Africa. “Blanket taxes on every crypto transaction, regardless of its nature, are unworkable and risk driving innovation away.”
Platforms are now being asked to assess, convert, and remit tax on all asset movements within five working days, a process that is technically and financially difficult even for large global exchanges. Smaller local startups face even steeper hurdles.
“What is taxable? Who is the taxpayer? What counts as a taxable event? These are still unresolved questions,” said Allan Kakai, Legal Chief at Steakhouse Financial and Director at the Virtual Assets Chamber of Commerce. “Unclear laws lead to overcompliance or exit, both hurt the ecosystem.”
The core industry recommendation is a simpler, fairer model: apply tax only at the on-ramp and off-ramp stages, when fiat is converted to crypto and vice versa. This approach would remove guesswork, reduce friction, and increase compliance.
“If the tax is predictable and clear, more players will comply,” Cooke said. “But trying to tax wallet-to-wallet transfers, or fluctuating asset values in real time, simply doesn’t work.”
The concerns come ahead of the second reading of the Virtual Assets and VASP Bill in Parliament, set for June 2025. While the Bill offers a broader regulatory framework for the sector, industry leaders stress that the details of tax enforcement must be practical, not punitive.
Binance, which operates cautiously in Kenya, has submitted all required data, filed user taxes, and continues to engage with regulators to encourage a more workable approach.
“Kenya has a strong crypto community and a clear opportunity to lead Africa on regulation,” said Cooke. “But innovation can’t survive in an environment where the rules don’t reflect reality.”
The industry is urging regulators to collaborate with platforms, legal experts, and civil society to co-develop a sustainable tax structure that supports both government revenue and digital growth.
