The Kenya Revenue Authority (KRA) is set to implement a new real-time tax system designed to integrate with cryptocurrency exchanges, enabling the authority to track crypto transactions and enforce tax collection. Kenya, with an estimated four million cryptocurrency users—one of the highest user bases in Africa—is looking to capitalize on this sector to expand its tax base.
According to KRA, the value of crypto transactions in 2022 reached approximately $18.6 billion (KES2.4 trillion), a figure that rivals the financial throughput of some of the nation’s commercial banks.
KRA’s documentation for the fiscal year 2024/25 details their tax collection strategy, stating;
The system will interface with cryptocurrency exchanges and marketplaces to observe and document cryptocurrency transactions. It will record pertinent transaction details such as the date, time, type, and value.
Despite the crypto industry’s growth in Kenya, it remains largely unregulated by key financial authorities, including the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK). Nevertheless, the industry has flourished, with major exchanges like Binance and Coinbase providing services in the country.
A significant portion of crypto trading in Kenya occurs through peer-to-peer (P2P) transactions, with traders often using mobile money platforms to circumvent regulatory oversight. The KRA has acknowledged that its outdated systems have impeded its ability to track and tax these transactions, resulting in considerable revenue loss for the government.
The KRA refers to section 3 of Kenya’s Income Tax Act to assert that earnings from crypto transactions are taxable. The agency’s objective is to establish a “robust and efficient system” that will facilitate effective and efficient tax collection from cryptocurrency activities.
Cryptocurrency has attracted a youthful demographic of traders in Kenya, drawn by the promise of rapid returns despite the CBK and CMA’s cautions about the high-risk nature of these investments. The sector’s popularity is also bolstered by low transaction costs, quick transfer times, and the country’s solid internet infrastructure.
Chainalysis, a U.S.-based blockchain analytics company, reports that Kenyan crypto holders primarily acquire cryptocurrencies to safeguard savings, for commercial purposes such as paying for goods and services, and for personal remittances to other continents, notably Europe and the U.S.
Recognizing the significance of the crypto market, the KRA emphasizes the importance of developing a system to monitor and tax cryptocurrency transactions. However, the legal status of crypto exchanges in Kenya remains ambiguous, which could pose challenges for the KRA in integrating its system with these platforms.
In 2023, a proposed amendment to the Capital Markets Act was introduced in the National Assembly, aiming to impose a capital gains tax on exchanges and an excise duty on transactions. The bill has passed the finance committee’s scrutiny and is currently awaiting further action in the National Assembly.
