Kenya has announced its decision to apply a 1.5% tax on commissions earned by foreign crypto companies from their customers. The new regulations encompass all foreign crypto exchanges that generate interest by facilitating the buying and selling of digital assets in Kenya. This move is an extension of the existing 1.5% digital tax service enforced by the country on January 1, 2021, which was reserved for foreign firms that offered digital services to Kenyans but were not registered in Kenya.
The value-added tax regulations have been amended to include the new expansion. It states that a taxable electronic, internet, or digital marketplace supply includes facilitating online payment for, exchange, or transfer of digital assets, excluding services exempted under the Act. Digital assets are defined as anything created and stored digitally that provides value. This includes cryptocurrencies, NFTs, and other forms of digital assets such as data, images, video, and written content.
The new tax service requires foreign crypto companies in the region to pay commission fees generated from over 4 million users. Leading crypto exchanges like Binance, Coinbase, and Kraken are also subject to the new regulations. As of the end of 2022, 10.71% of Kenyans own cryptocurrencies, making Kenya one of the largest crypto markets in Africa. According to Chainalysis’ 2022 Crypto Adoption report, Kenya ranks 19th globally in terms of crypto adoption.
In addition to investing in crypto as an investment tool, Kenya is also active in crypto mining. At the beginning of 2022, the country welcomed Bitcoin (BTC) mining companies to set up operations in Kenya to use excess geothermal power for mining. Local citizens have also invested in mining operations, with a rural village going viral in December 2022 for its mining activities and the use of off-grid energy generated by mining to power the village.
In conclusion, Kenya’s new regulations will impact foreign crypto exchanges that facilitate the buying and selling of digital assets in the country. The regulations define digital assets as anything that provides value and is created and stored digitally, including cryptocurrencies, NFTs, and other forms of digital assets. With Kenya being one of the largest crypto markets in Africa, these new regulations will have a significant impact on the industry in the region.