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Tuesday, February 27, 2024

Kenya Mulls 3% Tax on Crypto (Report)

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The government of Kenya plans to impose a 3% tax on cryptocurrency transfers to narrow the fiscal deficit of the country and boost its domestic revenues.

Kenya is among the leaders on the African continent in terms of crypto adoption. Patrick Njoroge – Governor of the Central Bank – has previously suggested that bitcoin could solve the nation’s problems with its depreciating official currency.

Crypto Included in the New Bill

As reported by Bloomberg, Kenya’s lawmakers might implement a 3% tax on the transfer or exchange of cryptocurrencies, whereas a 15% levy could affect creators of monetized online content.

The proposal is part of a newly-designed bill that could stabilize the financial condition of the African nation. President William Ruto aims to double tax collections to 5 trillion shillings (around $37 billion) in five years and use the funds to promote monetary growth.

The legislation will become official from the beginning of July should the Kenyan lawmakers give their nod. The country estimates revenue of approximately $21 billion during the first 365 days (14% more than the anticipated collections for the ongoing fiscal year).

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Kenya ranks as a lower-middle-income economy, with over 16% of its population living below the international poverty line. Economic inequality, health issues, and government corruption are the main factors for the negative trend. Despite its problems, it remains one of the most developed counties in eastern and central Africa.

Kenya: the African Crypto Leader

Contrary to the financial difficulties in the country, a substantial number of Kenyans have turned their focus toward the cryptocurrency industry in the past few years.

Research carried out by the United Nations (UN) in the summer of 2022 estimated that 8.5% of the population (more than 4 million individuals) were HODLers: the highest adoption rate in Africa. South Africans (7.1%) and Nigerians (6.3%) rounded up the top 3 list.

However, the UN could not determine the approximate value of digital assets held by Kenyans due to the lack of comprehensive regulations in the industry:

“The returns from cryptocurrency trading and holding are, as with other speculative trades, highly individual. On balance, they are overshadowed by the risks and costs they pose in developing countries. The sector is not regulated in the country and remains largely unregulated even in the developed world.”

It is worth noting that Kenya’s central bank has a somewhat positive stance on bitcoin (unlike many other centralized financial institutions across the globe). Governor Njoroge suggested in 2021 that adopting the primary cryptocurrency could ease the financial turmoil that hit the region shortly after the COVID-19 pandemic.

“Our decision to shift to Bitcoin is both tactical and logical. Our currency has always been the punching bag for the IMF, which always claims that the Kenya Shilling is overvalued. This has led to too much pressure on the Kenyan Shilling, and this has a negative effect on the economy,” he said.

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