The Kenya Revenue Authority (KRA) is set to introduce a new tax system designed to monitor cryptocurrency transactions in real-time. This system aims to reinforce the KRA’s tax collection program by targeting the rapidly growing crypto user base in the country. With over 4 million crypto users, Kenya is one of Africa’s leading countries in cryptocurrency adoption, offering a significant revenue opportunity for the government.
In a strategic move for the financial year 2024/25, the KRA revealed plans to integrate with crypto exchanges and marketplaces to track and record transaction details, including date, time, type, and value. In 2022, the value of crypto transactions in Kenya reached an estimated $18.6 billion (KES 2.4 trillion), which could surpass the transaction volume of some commercial banks. The KRA acknowledged that previous attempts to tax the crypto industry had failed due to outdated systems, leading to revenue losses.
A Growing and Unregulated Market
Despite its popularity, the crypto industry in Kenya remains largely unregulated. Regulatory authorities like the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK) have yet to implement strict measures to govern the market. As a result, crypto exchanges such as Binance and Coinbase operate widely, with many transactions occurring through Peer-to-Peer (P2P) networks. P2P traders commonly use mobile money platforms to circumvent regulatory oversight, complicating efforts to track taxable earnings.
The KRA aims to rectify this by enforcing tax collection on crypto transactions, as outlined in Section 3 of Kenya’s Income Tax Act. The authority emphasized the need for an efficient system to help Kenya tap into potential revenue, particularly given the high levels of crypto adoption among Kenyan youth.
Kenya is ranked among the top five countries for crypto adoption in Africa, yet the legal status of cryptocurrencies remains unclear. This ambiguity could pose significant challenges for the KRA as it seeks to widen its tax net around the crypto industry. However, the need for regulation is growing, especially as crypto is increasingly used for savings preservation, buying and selling goods, and international remittances, according to a Chainalysis report.
Despite warnings from regulatory bodies about the risks of investing in volatile crypto assets, the number of users continues to grow, driven by the promise of high returns on investment (ROI).
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