The Kenyan government now wants to tax crypto transactions in all exchanges in the country, even as the global crypto market undergoes a mass meltdown.
Plans are underway to amend the capital markets law, and introduce a 20% excise tax on every crypto transaction fee, in a move widely seen as an ineffective strategy by the new government to reduce foreign borrowing by expanding the domestic tax net.
If the bill is approved by parliament, Kenyans will be subjected to remitting capital gains tax or income tax to the Kenya Revenue Authority for the sale or use of crypto. It reads: “Where the digital currency is held for a period not exceeding 12 months, the laws relating to income tax shall apply or for a period exceeding 12 months, the laws relating to capital gains tax shall apply.”
By introducing the law, Kenya, whose central bank has been cautioning citizens against the use and trade of crypto, will be following in the footsteps of Ethiopia, which first banned crypto before regulating it. Singapore-based crypto research company Tripple-A estimates the number of crypto traders in Kenya at 6.1 million, out of a population of close to 55 million people.
Kenyans have seen enough of crypto drama
But the news have not been a welcome message for majority of Kenyan crypto optimists, who have witnessed the price of bitcoin plunge below $16,000 on Nov. 21 in a bear market likely to last for several months. Having burned their fingers in crypto earlier this year and now unable to withdraw their balances in the recent FTX collapse, many crypto traders are enraged by the government’s recent move.
“This tax will be passed on to unsuspecting users on centralized exchanges. Most decentralized platforms are not Kenyan and hence the government has no jurisdiction to control them,” Mark Kajuye, a Nairobi-based crypto trader tells Quartz.
On social media, the outrage is more amplified, with many users concerned that the government is only interested in taxing the space and not regulating it fully, to protect traders.
Kenya has one of Africa’s most tech savvy populations, with the high crypto adoption being fueled by reducing cost of mobile internet, rising internet penetration, and a relatively high smartphone penetration. But the crypto community in the country could wane in coming months due to declining confidence in crypto investments that has seen over $2 trillion wiped off the global market this year.