A Kenyan digital asset sector Think Tank has thrown the country’s high taxation and exaggerated compliance costs in its political recommendations to the government.
The Virtual Assets Chamber of Commerce (VACC) expressed their suggestions in response to the recently proposed Virtual Asset and Virtual Asset Service Supplies Bill 2025Presented by the country’s tax chamber last month. The bill is the first comprehensive framework for polishing the growing sector, with proposals including license regime, tax policy and investors’ protective measures.
As Many other stakeholdersVacc expressed its support for robust rules for the sector and noted that this would provide “much needed clarity for companies and investors, which ensures that Kenya remains competitive in the global digital economy.”
However, it condemned the proposed 3% digital asset tax, which it says exceeds the global standards. It did not Indonesia Is the only other country with a similar tax, and even then it is limited to 0.1%-0.2%.
“The industry cannot survive a tax that is ten to thirty times higher than standard exchange charges and exceeds our customers’ profit margins far,” Allan Kakai warned, the Vacc Director.
“This tax threatens to make the industry basically inevitable, leaving supervisory authorities with nothing to regulate or tax. An immediate resolution is critical. “
The proposed high tax is typical of the Kenyan government’s strategy over the past three years. Since the ruling Kenya Kwanza administration took office, it has increased taxes in each sector in the economy to fulfill its ambitious development goals and caused rebellion and demonstrations from the public.
However, the government may feel embedded in its strategy because of its success in 2024. The country’s taxman revealed that it had collected $ 78 million from the digital asset sector last year from less than 400 digital assets. When Kenya is home to over four million digital assemblies, the tax authority believes that it can push much more from the sector.
Kenya is not the only nation struggling with digital asset taxes. In India, investors must pay a tax of 30% on profits and an additional fee of 4%, which the sector has decorated as excessive for several years. South Korea has been forced postpone his tax regime for seven years due to public rebellion, while Italy was forced to trim a proposed 42% tax After industry protests.
“Adapt with mica, cut excessive compliance costs”
In addition to taxes, VACC urged the Kenyan government to adopt a balanced regulatory method that adapts to global best practice, for example EU markets in Crypto Assets (Mica) frameworks. Mica came full at the end of last year, making EU 27 members the first globally to have extensive regulations for the sector. African countries have long has been prompted To adapt their approaches to Mica to reduce the burden for completely new regulations.
Other recommendations included encouraging entrepreneurship, attracting foreign direct investment and a licensing system to meet various service providers.
VACC further proposed a reduction in the “exaggerated compliance costs”, which it says to deter foreign VASPs from setting up operations in the country and postpon the smaller local players. Again, this is not unique to the East African nation; In Hong Kong, for example, the implementation of a new license frame two years ago led to an increase in compliance costs, with applicants who lost to $ 20 million.
Think Tank also urged the government to “provide clear definitions and guidelines to ensure Stablecoins drive economic inclusion and economic efficiency. “
As with dozens of other African countries, Kenyans have made their way to Stablecoins in recovery over the past two years. Last month, a report from the International Monetary Fund revealed The fact that Stablecoins has become particularly popular in cross -border payments for dollar shortages and a weakened shilling.
In neighboring Uganda, the Stablecoin Revolution has led to the launch of a local Stablecoin, KitepesaTo offer local solutions to the country’s demand for smooth, efficient and cheap digital payments. Kitepesa, which was started on BSV blockchain, is linked to the Ugandan shilling to reduce volatility in daily transactions.
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