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Is Kenya's 1.5% crypto tax a threat to Africa's digital ambitions?

Is Kenya’s 1.5% crypto tax a threat to Africa’s digital ambitions?

June 10, 2025
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Home Cryptocurrency

Is Kenya’s 1.5% crypto tax a threat to Africa’s digital ambitions?

Abimbola Samuel by Abimbola Samuel
June 10, 2025
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Is Kenya's 1.5% crypto tax a threat to Africa's digital ambitions?

Is Kenya's 1.5% crypto tax a threat to Africa's digital ambitions?

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Kenya’s proposed 1.5 percent tax on every cryptocurrency transaction, currently under debate in Parliament as the Digital Asset Tax (DAT), is poised to deliver a setback to the nation’s fintech sector and, by extension, Africa’s digital integration efforts.

With over 450 million unbanked residents across Africa, digital assets present an opportunity to bridge these financial gaps and extend services to underserved regions.

Kenya’s crypto tax may raise costs for daily transactions and needs

However, this proposed tax risks escalating transaction costs, potentially pushing users, particularly the tech-savvy youth, away from regulated platforms and into the unregulated markets.

“For many young Kenyans earning in Bitcoin or Tether’s USDt from freelance work, gaming or coding, this tax means losing income before converting it to mobile money to pay rent, school fees or basic living expenses,” the Cointelegraph report noted.

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Given that the nation is recognised as a leader in fintech and mobile money, its regulatory decisions often serve as a benchmark for other African nations and a crucial signal to global investors.

Implementing a blanket transaction tax could convey a message that policymakers view digital assets as “speculative threats rather than infrastructure for innovation and inclusion,” according to the report.

Early indicators suggest a shift, with local startups already opting to incorporate in countries like Rwanda and South Africa, which are perceived as having more supportive policy frameworks. International exchanges are also re-evaluating their expansion plans in Kenya, citing “regulatory uncertainty and rising compliance costs.”

Indonesia, for instance, introduced a 0.1 percent crypto transaction tax in 2022, only to see its revenue fall by over 60 percent by 2023 as users migrated to offshore or peer-to-peer platforms.

Therefore, Kenya’s proposed rate, being 15 times higher, carries a notable risk of similar, or even more pronounced, capital flight. In contrast, South Africa has promoted a growing digital asset sector by embracing regulatory sandboxes and approving over 100 crypto licenses.

Kenya mulls VASP Bill 2025 to boost AML and regulatory compliance

Adding to the complexity, Kenya is also considering the Virtual Asset Service Providers (VASP) Bill 2025. This bill aims to align with global efforts to enhance compliance, including those related to Anti-Money Laundering (AML), countering the financing of terrorism (CFT), and countering the financing of proliferation (CPF) obligations.

Without further argument, Africa’s future is tied to economic integration, a vision embodied by the African Continental Free Trade Area (AfCFTA), which envisions a unified market across 54 nations.

In fact, digital assets are well-positioned to facilitate this vision; however, inconsistent or strict crypto regulations could be a threat to impede this progress. The EU’s MiCA framework serves as a model, demonstrating that harmonised, innovation-friendly regulation can work. Africa has a similar opportunity to lead, provided countries coordinate their regulatory approaches.

Industry submissions to Kenya’s National Assembly Committee on Finance and National Planning propose a pragmatic four-point blueprint for smart regulation, according to the report:

Tiered taxation:

Instead of a flat 1.5 percent, taxes should be tailored by use case, treating digital assets under existing property disposal rules to avoid double taxation and encourage everyday use.

Innovation sandboxes:

Support blockchain experimentation – from carbon credits to stablecoins – within regulatory testbeds to strike a balance between innovation and risk.

Privacy-first compliance:

Incorporate modern tools, such as public audits and cryptographic proofs, to ensure oversight without compromising citizens’ rights.

Phased rollout:

Prioritise education and voluntary compliance, working with academia and industry leaders to build capacity before full enforcement.

Kenya has a legacy as a fintech trailblazer

The implementation of a well-considered regulatory architecture holds the potential to guide the continent’s next digital chapter, one defined by inclusion, investment, and innovation.

The question remains whether Kenya will choose to lead with foresight or risk falling behind more peers in the global digital economy. This is crucial for establishing a tone that can truly empower cross-border trade, foster youth employment, and build inclusive financial systems across Africa.

Tags: AfricaBitcoincrypto regulationDigital Asset TaxKenya
Abimbola Samuel

Abimbola Samuel

Experienced crypto writer with 2+ years of expertise. Skilled researcher and analyst delivering high-quality articles. Providing insightful perspectives on the latest crypto trends.

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