Kenya’s New Tax Regulation Would Levy Crypto Firms 1.5% Starting this Year Author: Jimmy Aki Last Updated: 08 January 2021 Kenya is one of Africa’s top countries when it comes to crypto adoption. With a thriving crypto industry set to grow even more over time, the government is setting a strong tax structure. The Tax Man Cometh According to local news sources, Kenya’s Digital Service Tax (DST) is set to come into effect this year. The law, which was enacted last year, is part of the government’s focus on regulating the digital services sector. As part of the Finance Act, the DST will impose a 1.5 percent levy on all e-market transactions – including those conducted via cryptocurrencies. Speaking to industry news sources, Reginald Alango, a country representative for peer-to-peer crypto exchange Bitzlato, explained that the new policy levies the tax on every crypto sale’s gross transaction value. He said it was too early to see if the policy will negatively affect crypto adoption in the African country, especially with the youth driving adoption en masse. The Kenyan Revenue Authority (KRA) has also pointed out that the DST will serve as final tax remittances for foreign companies and citizens who make crypto transactions in the country. Kenyan-based individuals and companies will see their DST payments offset against income taxes for the year. A Call for Increased Regulation While Kenya is looking to tax crypto transactions, the country still lacks a stable crypto regulatory regime. This is despite the increasing adoption of cryptocurrency in the East African country. According to Chainalysis’s Crypto Adoption Index, Kenya ranks first in Africa and fifth in the world in crypto adoption. Data from Useful Tulips also shows that the country has the second-largest weekly peer-to-peer volumes on the continent, coming behind only Nigeria. Last year, Stephany Zoo, a top executive at local exchange Bitpesa, explained that the country’s crypto industry’s growth means that regulation was necessary now, more than ever. On the prospect of regulation, the government might be looking to do something soon. Last October, news media reported that the Central Bank of Kenya (CBK) was looking into partnering with international banks on a possible Central bank Digital Currency (CBDC). Speaking during the Georgetown DC Fintech Week, CBK Governor Dr. Patrick Njoroge reportedly said: “We [the CBK] are already having discussions with other global players, in various ways, around the introduction of Central Bank Digital Currencies. The push comes as a result of mushrooming of private cryptocurrencies and we are already feeling left out and need to create our own space.” The central bank boss explained that they would need to keep a close eye on private cryptocurrencies, especially with the ever-present threat of terrorist financing and money laundering. A possible CBDC could pave the way for eradicating private cryptocurrencies, allowing the government to provide the benefits of crypto transactions and oversee financial activity within its shores.