Business Daily Africa reported on November 21 that if the Kenyan parliament accepts the proposed changes to crypto regulation and taxation, the Kenya Revenue Authority (KRA) will go after 4 million Kenyans with cryptocurrency holdings.
The Capital Markets (Amendment) Bill 2022 seeks to introduce an excise duty structure like the one applied to bank transactions. It will apply a 20% excise duty deduction on all commissions and transaction-related fees.
According to TripleA research report, Kenya ranks number one in the world for peer-to-peer cryptocurrency trading volumes while coming in at number five when it comes to total cryptocurrency activity.
With an estimated 4.5 million Kenyans owning cryptocurrency, 8.5% of the country’s population has embraced this phenomenon – making Kenya rank number one globally regarding percentage ownership rates.
The country is in the top ten global and African countries for both bitcoin ownership and blockchain-related transactions. Kenya is rated fifth internationally for overall digital currency activity and first globally for P2P crypto trading volume, which enables merchants to conduct business directly with one another without the need for a centrally located third party.
However, Kenyan investors purchase digital currency to save their money from being devalued due to the region’s inflation, so they can easily send money internationally without going through rigorous bank processes. They also use it for personal financial transactions, such as using it when abroad or buying goods from outside.
As per Business Daily Africa’s report, Governor of the Central Bank of Kenya Patrick Njoroge believes that while digital currency can be hazardous to financial stability, it can also serve as an asset for integration into the current banking systems.
Kenya’s Crypto Bill “The Capital Markets”
According to the report, if Kenyans sell or use digital currencies, the higher market value will be subject to the KRA capital gains tax. Those who make cryptocurrency trading their company may have to pay income taxes on their profits.
The bill, sponsored by Mosop MP Abraham Kirwa, said:
Where the digital currency is held for a period not exceeding twelve months, the laws relating to income tax shall apply or for a period exceeding twelve months, the laws relating to capital gains tax shall apply.
For the first time ever, cryptocurrency transactions in Kenya will be regulated and brought into the public eye. Even in industrialized nations, where exchanges are more closely monitored, cryptocurrencies are still largely unregulated and uncontrolled.
Estimating how much money Kenyans hold (or are owed) through digital assets is difficult due to the lack of reliable data – but it’s believed to be an astronomical amount, considering that most citizens have a high literacy level when it comes to technology.
For the first time, if the bill will be approved, cryptocurrency will be regulated by law. For businesses and people in Kenya, the increasing mainstreaming of cryptocurrency might spell significant changes.
Those who hold crypto assets need to report the information about it to the Capital Markets Authority (CMA) for tax purposes. They are required to provide details about when they acquired it and when they sold it.
According to the bill:
A person who possesses or deals in digital currency shall provide the Authority with the following information for tax purposes—the amount of proceeds from the transaction, any costs related to the transaction and the amount of any gain or loss on the transaction.
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