Kenya’s lawmakers have introduced a new bill that proposes a tax on cryptocurrency and non-fungible token (NFT) transfers. The Finance Bill 2023 will levy a 3% tax on income derived from the transfer or exchange of digital assets, including NFTs, and also seeks to bring about a 15% tax on digital content monetization, such as sponsorships, merchandise sales, and paid subscriptions. The bill will undergo five rounds of readings and committees before it goes to the president for final assent into law.
Crypto exchanges or those initiating the transfer of crypto or NFTs would be required to collect the tax and deduct 3% of the transfers’ value to be paid to the government. The bill also requires exchanges not registered in Kenya to register under the tax regime. The digital assets section of the bill has seen a mixed response online.
Rufas Kamau, a Kenyan research and markets analyst, sarcastically asked if the 3% tax applied to “supermarket and credit card loyalty points.” Meanwhile, the Kenyan crypto advocacy group Cryptocurrency Kenya claims a crypto-only tax is “targeted harassment” and argued that the tax was higher than the fees charged by exchanges.
While Kenya is not a major player in the crypto scene, it is one of the top 20 countries in terms of crypto adoption. Kenya first made an effort to regulate crypto in November, introducing amendments to its capital market laws requiring those who own or deal in crypto to report information on their activities to the authorities.
However, the African continent is making moves to become a prominent player in the crypto scene, with Nigeria, Kenya, and the Central African Republic embracing crypto, to the extent that CAR declared Bitcoin as a legal tender. Many African countries are facing hyperinflation, and their fiat currencies are often pegged to a superior currency, making crypto a viable option against falling fiat currencies.
The introduction of a tax on crypto and NFT transfers in Kenya could set a precedent for other African countries. While the Kenyan government sees the tax as a way to increase revenue, some argue that a crypto-only tax is unfair and could hinder adoption. However, if other African countries follow Kenya’s lead, it could lead to a more standardized approach to regulating crypto on the continent, which could potentially attract more investors and businesses to the region. Regardless, the African crypto scene is rapidly evolving, and it will be interesting to see how this new tax proposal shapes its future.