The Capital Markets (Amendment) Bill, 2023, has received approval from the National Assembly’s Finance and National Planning Committee in Kenya.
On December 4, a Kenyan local news outlet, Business Daily, reported that the bill defining crypto assets as securities and including the capital gains tax on them had passed the Parliamentary Committee. The next step is for the bill to be introduced to the lower chamber of Parliament. If approved by the House, it will proceed to the President for assent.
The parliamentary committee, chaired by Molo MP Kimani Kuria, has approved the proposal to amend the Capital Markets Act, Cap 485, to include digital currencies in the definition of securities. The amendment aims to regulate the trading of cryptocurrencies and guard against the proceeds of crime and terrorism financing. Once enacted, the law will provide a framework for governing the trading of cryptocurrencies in Kenya.
According to the report, Mr. Kimani said during the pre-publication scrutiny of the legislative proposal,
“This is a very critical law that will guard our country against the proceeds of crime and terrorism financing. Cryptocurrencies are already being traded by millions of Kenyans, yet we have no law to govern it. We approve this Bill for publication.”
Kenya Proposes Taxation Framework for Cryptocurrency Transactions in 2023 Amendment Bill
The Capital Markets (Amendment) Bill, 2023, sponsored by Mosop MP Abraham Kirwa, is set to introduce significant changes in Kenya’s approach to cryptocurrency transactions. If approved, the Bill will usher in taxation measures for crypto exchanges and digital wallets, imposing transaction taxes similar to the excise duty charged on traditional bank transactions.
According to Business Daily, banks in Kenya currently impose a 20 percent excise duty on all commissions and fees related to transactions. However, under the proposed amendment, Kenyans engaging in cryptocurrency transactions will be liable to pay capital gains to the Kenya Revenue Authority (KRA) based on the increased market value of their digital assets when sold or used in transactions.
The proposed amendment outlines specific provisions governing digital currency transactions, including their creation through crypto mining, regulations for trading digital currencies, taxation protocols, ownership rules, and measures to promote innovation in the sector. Notably, it also considers the environmental impact of digital currency generation and crypto mining.
Mr. Kirwa asserted the importance of embracing cryptocurrencies, stating, “Cryptocurrency is the future. This will be the norm because we will buy and sell using cryptocurrencies.” He urged Kenya to take a proactive stance similar to its pioneering adoption of mobile money through M-Pesa, highlighting that other African countries like South Africa and Nigeria have already legalized cryptocurrencies.
The largely unregulated nature of the cryptocurrency sector globally poses challenges in determining the value of digital assets held by Kenyans, particularly the tech-savvy population. The bill mandates individuals dealing in digital currency to provide the Capital Markets Authority (CMA) with specific information for taxation purposes.
Those involved in digital currency transactions must furnish the regulator with details such as the amount of virtual currency in Kenyan shillings, the type of virtual currency transacted, the acquisition date, and the sale date. The bill underscores the need for transparency, requiring individuals to disclose proceeds, transaction costs, and any gains or losses.