Kenya is the latest country to show intent to regulate the cryptocurrency sector targeting the taxation of digital currency transactions as the industry expands.
If parliament approves The Capital Markets (Amendment) Bill, it will see the government introduce an income tax regime for cryptocurrency traders, Business Daily Africa reported on November 21.
“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,” the bill says.
The proposed law also aims to impose capital gains for the increased market value of the cryptocurrencies when the specific assets are either sold or used in a transaction.
Bank deduction for crypto transactions
With the country hosting at least four million cryptocurrency investors, the government plans to have banks deduct a 20% excise duty on all commissions and fees charged on digital asset transactions.
Interestingly, crypto holders must inform the country’s regulator, the Capital Markets Authority (CMA), with information for tax purposes. Part of the information to be shared includes the date on which the cryptocurrency was acquired and the date on which the asset was sold.
“A person who trades in digital currencies shall keep records of digital currency transactions, including purchases and sales, pay taxes on any gains that are made from transactions in digital currencies in accordance with the applicable laws,” the Bill states.
Crypto to go mainstream
If the bill is passed into law, it will mark the first time the country formally regulates cryptocurrencies, with the sector going mainstream.
“The amendment will provide for specific provisions to govern digital currency transactions in Kenya, including the definition of digital currencies, its creation through crypto mining, and provide for regulations around trading of digital currencies,” the Bill added.
At the moment, Kenya’s crypto space remains heavily unregulated, with a previous government report indicating at least four million investors have incurred losses amid the prevailing bear market. In this case, the Central Bank of Kenya (CBK) warned Kenyans against investing in assets like Bitcoin (BTC).
As per a Finbold report, CBK governor Patrick Njoroge also revealed that he was under pressure from crypto proponents to convert the country’s reserves into Bitcoin.