The Kenya Revenue Authority (KRA) is set to go after the more than four million Kenyans who own cryptocurrencies if MPs approve changes to the law aimed at regulating and taxing the fast-growing digital currency trade.

The Kenyan tax authority has proposed a Capital Markets (Amendment) Bill, 2022 that seeks to introduce taxation of the crypto exchanges and digital wallets and imposes transaction taxes akin to excise duty charged on bank transactions.

According to Business Daily Africa, banks will be deducting 20 percent excise duty on all commissions and fees charged on transactions. Additionally, Kenyans will pay the KRA capital gains for the increased market value of the crypto when they sell or use the digital currencies in a transaction if the Bill is approved.

Mosop MP Abraham Kirwa, stated, “Where the digital currency is held for a period not exceeding twelve months, the laws relating to income tax shall apply or for a period exceeding twelve months, the laws relating to capital gains tax shall apply.” 

This would be the first time Kenya subjects cryptocurrency transactions to any type of regulation whatsoever. The industry is not regulated in the nation and is still mostly unregulated in developed nations.

This makes it difficult to establish the value of digital assets held by the mostly tech-savvy Kenyans, but the amount could run into billions of shillings. The Bill mandates that individuals who hold or deal in digital currency submit particular information to the Capital Markets Authority (CMA) for tax purposes.

Furthermore, those owning or dealing in digital currency will be required to furnish the regulator with information regarding the amount of virtual currency in Kenya shillings. They will also be required to inform the CMA of the type of virtual currency transacted, the date on which the virtual currency was acquired, and the date on which the virtual currency was sold.

The Bill states, “A person who possesses or deals in digital currency shall provide the Authority with the following information for tax purposes—the amount of proceeds from the transaction, any costs related to the transaction, and the amount of any gain or loss on the transaction.” 

The Bill was introduced over six months after a UN assessment revealed that Kenya had the highest percentage of its population using cryptocurrencies in Africa, highlighting the nation’s vulnerability to the growing collapse in the crypto industry.

According to a survey by the United Nations Conference on Trade and Development (UNCTAD) published in June, 4.25 million people, or 8.5% of the population, in the country are cryptocurrency owners.

This places Kenya ahead of developed economies such as the United States, which is ranked sixth with 8.3 percent of its population owning digital currencies.