Grace Ashiru
The Kenya Revenue Authority (KRA) is preparing to implement a new real-time tax system that will integrate with cryptocurrency exchanges, enabling the government to monitor crypto transactions and collect taxes.
With approximately four million crypto users, Kenya ranks among the highest in Africa for cryptocurrency adoption, and the country is eager to tax this growing sector as part of its efforts to expand the tax base. In 2022, KRA reported that crypto transactions were valued at around $18.6 billion (KES 2.4 trillion), surpassing the volume of funds managed by some commercial banks.
“The system will integrate with cryptocurrency exchanges and marketplaces to track and record cryptocurrency transactions. It will capture details such as the transaction date, time, type, and value,” KRA explained in a document outlining its tax collection strategies for the 2024/25 financial year.
Although Kenya’s crypto market is still largely unregulated by the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK), it has become increasingly popular, with exchanges like Binance and Coinbase providing services.
Many crypto users in Kenya rely on peer-to-peer (P2P) transactions, often using mobile money for payments to evade regulatory scrutiny. The KRA acknowledged that its current outdated system has made it difficult to track and tax these transactions, resulting in a “significant loss of revenue for the government.”
The KRA pointed out that income from crypto transactions can be taxed under section 3 of Kenya’s Income Tax Act. “The goal is to develop a robust and efficient system that will allow KRA to collect taxes on cryptocurrency transactions effectively and efficiently,” the agency stated.
The cryptocurrency market, known for its volatile price fluctuations, has attracted many young Kenyan traders looking for quick profits, despite warnings from the CBK and CMA about the high risks involved. The high rate of crypto adoption in Kenya is also attributed to low transaction fees, faster transfer times, and good internet penetration.
According to US-based blockchain analytics firm Chainalysis, many Kenyans who hold cryptocurrency do so to preserve savings, for commercial purposes such as paying for goods and services, and for individual remittances, particularly to Europe and the US.
“With this potential, it has become increasingly important for KRA to implement a system that can track and collect taxes on cryptocurrency transactions,” KRA emphasized.
However, the unclear legal status of crypto exchanges in Kenya may pose a challenge to KRA’s efforts to integrate its tax system with these platforms.
In 2023, an amendment to the Capital Markets Act was introduced in the National Assembly, proposing the introduction of a capital gains tax on crypto exchanges and an excise duty on transactions. The bill, after approval by the finance committee, remains under consideration in the National Assembly.
