Kenya’s Lucrative Crypto Market Navigates Taxation and Regulation
Kenya’s crypto market, already subject to taxation under the Finance Act, 2023, is taking significant steps towards regulation. The Kenyan parliament has tasked the Blockchain Association of Kenya (BAK) with drafting the initial version of the Virtual Asset Service Provider’s Bill, colloquially referred to as the Crypto Bill. This decision follows BAK’s second appearance before the National Assembly Committee on Finance and National Planning on October 31. BAK had initially engaged with the committee in August 2023, opposing the Digital Asset Tax (DAT) provision in Kenya’s Finance Act, 2023.
As BAK prepares the draft, Kenya has witnessed substantial cryptocurrency transactions, totaling nearly $20 billion (KES 3 trillion) between July 2021 and June 2022. Kenya ranks third in Africa for cryptocurrency site traffic and 21st in global crypto adoption, underscoring the nation’s active involvement with crypto assets.
The meeting between BAK and the National Assembly Committee sought to enable BAK to partner with the national government in shaping cryptocurrency and digital asset regulation policies. BAK, alongside Binance, Yellow Card, Kotani Pay, and the Law Society of Kenya (LSK), presented key elements for a robust regulatory framework, including a clear licencing framework, tax framework, consumer protection framework, anti-money laundering (AML) and counter-terrorism financing measures, and a regulatory sandbox.
In response, the parliamentary committee directed BAK to draft and submit a bill governing digital assets within two months. This development acknowledges a knowledge gap that has historically hindered their ability to address this asset class. It also marks a unique instance of a parliamentary committee instructing an association to draft a bill for adoption.
BAK’s directive to draft Kenya’s digital asset regulatory framework, including tax integration and revenue guidelines, mirrors efforts in South Africa (Financial Sector Conduct Authority), Nigeria (Finance Act 2023, SEC Regulations on Digital Assets), and Mauritius (Virtual Asset and Initial Token Offering Services Act 2021), which lead in Africa’s crypto market values at $25 billion, $19 billion, and $3 billion, respectively.