Kenya’s Cryptocurrency Tax Threatens Africa’s Digital Sector

• Cryptocurrency tax reduces Kenya’s competitiveness
• African digital economy suffers from fragmented regulations
• Cryptocurrencies may migrate to unregulated platforms

Kenya's decision to impose a 1,5% tax on every cryptocurrency transaction raises concerns about the future of Africa’s digital economy. Experts warn that the move could push startups, freelancers and developers into unregulated environments or even overseas markets, undermining the country’s potential for technological leadership.

The move also threatens Kenya’s active participation in the economic integration promoted by the African Continental Free Trade Area (AfCFTA), which aims to unify 54 nations into a common market. The diversity of tax policies among African countries on digital assets could derail this unification project.

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Direct taxation of crypto assets affects groups that rely on cryptocurrencies as their primary source of income, such as traders, content creators, NFT artists, and professionals who use stablecoins for everyday transactions. Many Kenyan freelancers who are paid in cryptocurrencies for their services are at risk of not being able to convert these assets into local currency without significant losses.

In response to the criticism, the National Assembly’s Finance and National Planning Committee proposed important adjustments. Among the recommendations, it is worth highlighting the adoption of existing property disposal rules to avoid double taxation and allow crypto assets to maintain their usefulness in everyday life.

The committee also proposes that the country encourage innovation, including experiments with stablecoins and blockchain technologies applied to sectors such as carbon credits. To ensure privacy, it suggests implementing public audits and cryptographic mechanisms that protect user data.

Furthermore, a phased approach to implementing the regulations is advocated. Priority would be given to educating the population and encouraging voluntary compliance, with the aim of preparing the ecosystem before the full implementation of the fiscal measures.

With this, Kenya seeks to balance revenue collection and innovation, avoiding compromising its strategic position in the fintech and cryptocurrency sector on the continent.