The Treasury Intends To Tax Cryptocurrency Exchanges That Serve Over 4 Million Kenyans

If new legislation are passed, Kenya would begin charging cryptocurrency exchanges for commissions received from the country’s approximately four million citizens who deal in digital currencies.

The new regulations governing the payment of the digital service tax impose a 1.5 percent fee on platforms that enable the buying and selling of cryptocurrencies and other digital assets.

The Value Added Tax (Electronic, Internet and Digital Marketplace Supply) Regulations, 2023, published by Treasury Cabinet Secretary Njuguna Ndung’u, state that “for the purposes of these Regulations, a taxable electronic, Internet or digital marketplace supply include…facilitation of online payment for, exchange or transfer of digital assets excluding services exempted under the Act.”

Anything created or kept digitally with value might be considered a digital asset. Cryptocurrencies like bitcoins, data, photos, videos, and textual content are all examples of digital assets. Kenya imposed a 1.5 percent digital service tax in January 2021, and according to officials, it has already helped stop some international corporations from evading taxes.

It is assessed to international companies that are not registered in Kenya but provide services to Kenyans online. The main online exchanges impose fees for purchasing and selling cryptocurrency that range from as little as 0.9 percent to as much as 4.9 percent. Cryptocurrency exchanges are commercial marketplaces where users can purchase and trade digital assets like Bitcoin, Ethereum, and Tether, among others.

Binance, Coinbase, Bitstamp, Bitpanda, Kraken, Coinmama, UpBit, and eToro are a few of the exchanges on the list. Due to the industry-wide ripple effects of Sam Bankman-Fried’s FTX cryptocurrency exchange’s bankruptcy, they were late last year forced to reassure customers that their assets remain secure.

The largest cryptocurrency trading platform in the world, Binance, as well as smaller rivals like Crypto.com, OKX, and Deribit, have committed to provide evidence that they have enough reserves to cover their consumer liabilities. The US-listed exchange Coinbase has made an effort to disassociate itself from the turmoil affecting FTX, the Bankman-Fried-founded platform for digital assets.

The sudden demise of FTX and Bankman-Fried’s trading firm Alameda Research in November of last year, which were formerly seen as industry mainstays, severely damaged confidence in the market for digital assets.

Before it filed for bankruptcy, FTX had $9 billion in obligations and less than $1 billion in assets that could be sold for a profit.