An amendment to Kenya’s capital markets law was introduced on November 21 that would oblige cryptocurrency holders or speculators to provide the country’s Capital Markets Authority with information about their activities for tax purposes, local media report. It is the first time that Kenya has extended financial regulation to cryptocurrencies.
Under the Capital Markets (Amendment) Bill, Kenyans would pay capital gains tax to the Kenya Revenue Authority when they sell or use digital currencies. Cryptocurrencies held for less than a year would be subject to income tax, while after that time capital gains tax would apply. Kenya has an income tax that ranges from 10% to 30%. Banks already charge a 20% excise tax on all cryptocurrency-related transaction fees and commissions.
The Kenya Revenue Authority (KRA) will go after the more than 4M Kenyans who own #cryptoif MPs approve changes to the Capital Markets (Amendment) Bill, 2022, aimed at regulating and taxing the fast-growing digital currency trade. pic.twitter.com/LRlAgPJucJ
—Njeru’s Updates (@NjerusUpdates) November 21, 2022
The author of the bill, Abraham Kirwa MP, said:
“The amendment will establish […] the definition of digital currencies, their creation through the mining of cryptocurrencies and will establish the regulations around the trading of digital currencies. […] The amendment will also outline the responsibilities of individuals or companies that trade digital currencies, establish their taxation, ownership, and provide for the promotion of innovation in this area.”
The bill would define digital currencies as securities, provide for the licensing of independent cryptocurrency traders, and create a centralized electronic registry of digital currency transactions that take place in the country. It would also institute consumer protection measures, such as the creation of a fund “to protect investors from financial loss resulting from the bankruptcy of a licensed broker or trader” and privacy guarantees.
A Chainalysis study published in September ranked Kenya 19th in the world for cryptocurrency adoption and fifth for peer-to-peer trading. The proposed amendment comes as Kenyan President William Ruto calls for the country’s tax rate to be doubled. The country has about 4 million cryptocurrency users. With 8.5% of the population, which makes Kenya the fifth country in the world with the highest rate of possession.
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