KRA To Implement Real-time Tax System To Monitor Cryptocurrency Transactions
The Kenya Revenue Authority (KRA) is preparing to implement a real-time tax system to monitor and tax cryptocurrency transactions, according to a report by TechCabal on October 14. This initiative aims to address a major gap in revenue collection from digital assets.
Kenya has emerged as a leader in cryptocurrency adoption across Africa, with approximately 4 million users. In 2022, the country saw crypto transactions amounting to around $18.6 billion, surpassing the annual transaction volumes of some local banks.
Cryptocurrencies are increasingly being used for savings, commercial payments, and remittances, which has drawn the attention of the Kenyan government as an untapped source of revenue.
The KRA’s plan aligns with a global push by tax authorities to regulate and tax the rapidly growing digital currency market. Similar efforts are being made in countries like Nigeria and South Africa, although challenges remain due to the decentralized and opaque nature of many cryptocurrency transactions.
In support of this move, the Capital Markets (Amendment) Bill, 2023, introduced by Mosop MP Abraham Kirwa, seeks to amend the Capital Markets Act (Cap. 485A) to classify digital currencies as securities.
If passed, the amendment would empower the KRA to impose capital gains tax on cryptocurrency exchanges and excise duty on transactions, as reported by Citizen Digital on October 16.
The new system, part of the KRA’s strategy for the 2024/25 financial year, will integrate with cryptocurrency exchanges to track transaction details such as dates, values, and types. Currently, many crypto users in Kenya rely on peer-to-peer (P2P) networks, often using mobile money services to avoid regulation.
The KRA has acknowledged that outdated systems have led to “significant revenue loss for the government” and aims to modernize its tax collection methods, noting that Kenya’s Income Tax Act already applies to crypto earnings.
Statista projects that Kenya’s cryptocurrency market will generate $41.7 million in revenue by 2024, though growth is expected to slow, with revenue forecasted at $40 million by 2025.
The average revenue per user is estimated to be $57.2 in 2024, with the user base expected to reach 733,300 by 2025. Although Kenya’s mobile money ecosystem and tech-savvy population fuel crypto adoption, user penetration remains low, at around 1.3%.
Despite warnings from the Central Bank of Kenya and the Capital Markets Authority about the risks associated with cryptocurrencies, regulatory oversight is still minimal. The proposed amendments to the Capital Markets Act are pending in the National Assembly.
Globally, the cryptocurrency market is poised for significant growth. Gleb Yakolev, CEO of ITI Funds, predicts that the market could expand tenfold to match the $1.4 trillion gold market, given its current valuation of around $240 million. He suggests that early investments in the sector could offer substantial returns as the market continues to evolve.
