NAIROBI, Kenya, June 18 – Kenya’s ambitious move to tax digital assets has delivered a windfall for government coffers, raking in Sh10 billion in revenue over the past financial year, an achievement underscored by former KRA chair Anthony Mwaura.
But beneath this fiscal triumph, anxiety is mounting within the crypto sector. Industry players warn that the current tax regime, ushered in by the Finance Act 2023, could stifle innovation, discourage investment, and drive reputable crypto platforms out of the Kenyan market.
The 1.5 percent Digital Asset Tax, designed to bring order to a rapidly expanding industry, has sparked particular concern for its sweeping scope. By taxing everything from speculative tokens and stablecoins to straightforward wallet-to-wallet transfers under a single framework, the law fails to distinguish between fundamentally different types of transactions.
As a result, experts are urging policymakers to revisit the legislation and craft clearer, more nuanced rules that support growth while safeguarding the public interest.
“The challenge is not taxation itself. It’s about taxing the right things, at the right time, in a way that makes sense,” said Larry Cooke, Legal Counsel for Binance Africa.
“Blanket taxes on every crypto transaction, regardless of its nature, are unworkable and risk driving innovation away.”
Platforms are now being asked to assess, convert, and remit tax on all asset movements within five working days, a process that is technically and financially difficult even for large global exchanges. Smaller local startups face even steeper hurdles.
“What is taxable? Who is the taxpayer? What counts as a taxable event? These are still unresolved questions,” said Allan Kakai, Legal Chief at Steakhouse Financial and Director at the Virtual Assets Chamber of Commerce.
“Unclear laws lead to overcompliance or exit, both hurt the ecosystem.”
The core industry recommendation is a simpler, fairer model: apply tax only at the on-ramp and off-ramp stages, when fiat is converted to crypto and vice versa. This approach would remove guesswork, reduce friction, and increase compliance.
“If the tax is predictable and clear, more players will comply,” Cooke said. “But trying to tax wallet-to-wallet transfers, or fluctuating asset values in real time, simply doesn’t work.”
The concerns come ahead of the second reading of the Virtual Assets and VASP Bill in Parliament, set for June 2025. While the Bill offers a broader regulatory framework for the sector, industry leaders stress that the details of tax enforcement must be practical, not punitive.
Binance, which operates cautiously in Kenya, has submitted all required data, filed user taxes, and continues to engage with regulators to encourage a more workable approach.
“Kenya has a strong crypto community and a clear opportunity to lead Africa on regulation,” said Cooke. “But innovation can’t survive in an environment where the rules don’t reflect reality.”
The industry is urging regulators to collaborate with platforms, legal experts, and civil society to co-develop a sustainable tax structure that supports both government revenue and digital growth.
