Cryptocurrency Tax in Kenya

Cryptocurrency Taxation in Kenya: What You Need to Know in 2025

June 19, 2025

Cryptocurrency taxation in Kenya has become a critical topic in 2025 as digital currencies like Bitcoin and stablecoins see widespread use.

It is increasingly becoming the future of financial transactions.

Kenya has positioned itself as one of the pioneers in Cryptocurrency adoption, with over 6 million active users – representing a significant 11.1% of the 53.89 million crypto users across Africa.

This number is expected to grow, with a projected African penetration rate of 4.05% by the end of 2025.

This article explores the classification, regulation, and taxation of cryptocurrency in Kenya reflecting on the trends and challenges shaping cryptocurrency taxation in Kenya, including evolving tax and regulatory frameworks.

It also compares Kenya’s approach to that of South Africa and provides key considerations and recommendations for policymakers and crypto users alike.

Introduction

So, what is Cryptocurrency?

Cryptocurrency is a virtual digital currency secured by cryptography.

Cryptography involves securing data so that only authorized parties can access it, through encryption (converting data into an unreadable format) and decryption (restoring it to readable form).

Cryptocurrency is a decentralized system not governed by any bank or government.

It exists solely in digital form and uses cryptographic techniques to verify and record transactions.

These assets are stored in digital wallets that provide unique virtual addresses for sending and receiving funds.

Key Features of Cryptocurrency:

Digital/Virtual Nature: No physical representation.
Decentralization: Not issued by any Central Bank; operates on Peer-to-Peer (P2P) networks.
Cryptographic Security: Uses encryption for ownership verification and fraud prevention.
Blockchain Technology: Public ledgers record all transactions for transparency and security.
Price Volatility: Value fluctuates based on market demand and supply.

Its unregulated nature has fueled its popularity but also made it vulnerable to fraud, scams, and money laundering.

In response, the Kenyan government has begun imposing taxes and drafting regulatory frameworks to bring structure to the crypto space.

Cryptocurrency Taxation in Kenya - How KRA Classifies and Taxes Digital Assets

How does the Kenya Revenue Authority (KRA) classify Cryptocurrency?

KRA recognizes cryptocurrency as a digital asset.

The Finance Act 2023 defines digital or virtual assets as “anything of value that is intangible including cryptocurrencies, token codes, numbers held in digital form and generated via cryptographic means or otherwise.”

These measures form a key part of the government’s response to the rapid cryptocurrency taxation in Kenya, aiming to formalize and regulate digital asset activity.

Key Taxation Developments:
2012	– Section 3 of the Income Tax Act came into effect, requiring Kenyans to declare global income with a tax range of 10% to 30%. – However, enforcement on crypto income was ineffective due to the lack of systems to track crypto transactions.
2022	– The Capital Markets (Amendment) Bill was introduced to classify cryptocurrencies as securities under the Capital Markets Authority. – If enacted, this would impose: -Income Tax (10% – 30%) on crypto held for less than one year. -Capital Gains Tax (CGT) for long-term holdings
2023	– The Finance Act introduced a 3% Digital Asset Tax, effective from 1st September 2023. (N/B Finance Bill 2025 has proposed a lowered rate of 1.5%) – This tax applies every time a digital asset is bought, sold, exchanged, or transferred. It includes: – Airdropped tokens – Purchase or sale of NFTs – Sale of tokens for stablecoins – Token-to-token exchanges
2025 (Proposed)	– The Virtual Asset and Virtual Asset Service Provider (VASP) Bill is before Parliament. – It proposes: – Licensing and regulation of VASPs with physical offices in Kenya. – Mandatory AML/CFT compliance to prevent money laundering and terrorist financing. – Consumer protection including requirements for insurance and local banking access.

How Does the Central Bank of Kenya Classify Cryptocurrency?

The Central Bank of Kenya (CBK) has taken a cautious stance, raising several concerns:

Cryptocurrency is not legal tender in Kenya – it is not backed by the government and cannot be used to pay taxes.
No clear regulatory framework, making trading risky and unprotected.
High risk of loss due to market volatility and lack of traceability.
Restrictions on financial institutions, advising them not to open accounts for crypto traders.
Collaboration with the Capital Markets Authority to develop a regulatory framework for crypto assets

These cautious steps highlight the regulatory uncertainty surrounding cryptocurrency taxation in Kenya, which remains active but loosely governed.

Taxation of Cryptocurrency in South Africa

Is cryptocurrency taxed in South Africa?

Yes. Crypto assets in South Africa are subject to both income tax and capital gains tax, depending on the nature of the transaction.

Taxable Crypto Activities:

Mining of crypto assets
Buying or selling crypto for fiat currency
Using crypto to pay for goods and services

How are profits categorized?

Gross income if considered revenue
Capital gains if considered capital in nature

Failure to declare crypto income can result in penalties and interest.

Regulation of the Cryptocurrency Industry in South Africa

South Africa has taken a leading role in cryptocurrency regulation:

In 2024, it became the first African country to license crypto exchanges, with the Financial Sector Conduct Authority (FSCA) granting licenses to 248 firms.
Plans are underway to implement a Digital Rand, aimed at reducing transaction costs and improving cross-border payments.
South Africa is collaborating with other SADC countries to create blockchain-based regional payment systems.
Partnerships with financial institutions like Absa and Standard Bank aim to provide blockchain-based savings and lending solutions to underserved communities.

Policy Recommendations for Improving Cryptocurrency Taxation in Kenya

For cryptocurrency taxation in Kenya to thrive responsibly, the following policy actions are recommended:

Accelerate the passage of the VASP Bill to create a strong legal framework.
Equip KRA with tools to effectively track and audit crypto transactions.
Encourage innovation through regulatory sandboxes for blockchain and fintech startups.
Collaborate regionally to establish harmonized regulatory standards.
Promote public education on crypto risks, tax obligations, and regulatory compliance.

Conclusion

The number of cryptocurrency users in Kenya is steadily rising.

With rising cryptocurrency adoption in Kenya, the risks of fraud and unregulated transactions also grow.

Kenya must learn from South Africa’s progressive regulatory approach.

Enacting the VASP Bill and enhancing KRA’s enforcement capacity will help secure the market, protect consumers, and promote responsible innovation.

At Quartet Solutions, we stay ahead of crypto regulations and help clients remain compliant. Contact us today for personalized tax consultations.

Disclaimer

This report is for informational purposes only and does not constitute tax advice. For specific guidance on cryptocurrency taxation, consult a licensed tax professional or contact Quartet Consulting.

FAQ SECTION

Q1: Is cryptocurrency legal in Kenya?

While cryptocurrency is not illegal, it is not recognized as legal tender by the Central Bank of Kenya (CBK).
It therefore cannot be used to pay taxes or settle official debts. However, trading and owning crypto is allowed under the country’s current laws.

Q2: What are the current cryptocurrency taxation rules in Kenya?

Cryptocurrency is classified as a digital asset.
The Finance Act 2023 introduced a 3% Digital Asset Tax on every crypto transaction (buy, sell, exchange, transfer).

(N/B Finance Bill 2025 has proposed a lowered rate of 1.5%)

Depending on the holding period, crypto income may also be taxed under:
Income Tax (10%–30%)
Capital Gains Tax (for long-term holdings)

Q3: Does Kenya have a specific law for regulating crypto exchanges or wallets?

Not yet.

However, the Virtual Asset Service Providers (VASP) Bill, currently before Parliament, proposes to:

License crypto platforms operating in Kenya
Enforce AML/CFT compliance
Require consumer protection measures and local office presence

Q4: How does the Digital Asset Tax work in practice?

A 3% tax is charged on the gross transaction value of any crypto activity, including:

Airdrops
NFT sales
Crypto-to-crypto swaps
Token purchases and sales

This tax applies at the point of transaction, regardless of profit or loss.

N/B Finance Bill 2025 has proposed a lowered rate of 1.5%

Q5: What risks has the Central Bank highlighted about crypto?

The CBK has warned that:

Crypto is highly volatile and not government-backed
It carries risks of fraud, loss, and money laundering
There is no compensation for users if platforms fail
Financial institutions are discouraged from directly servicing crypto traders

Q6: How does Kenya’s approach compare to South Africa?

South Africa has taken a more progressive regulatory approach:

It has licensed over 240 crypto firms by 2024
Imposes income and capital gains tax on crypto
It Is currently working on a Digital Rand for cross-border efficiency
Uses regional partnerships to promote DeFi innovation

Q7: Who is required to pay tax on crypto in Kenya?

Any person or entity buying, selling, transferring, or exchanging crypto assets in Kenya is subject to the Digital Asset Tax.
Additionally, those holding crypto as an income source or capital asset must report it under income or capital gains tax.

Q8: Do crypto traders in Kenya need to register with the KRA?

Yes. Anyone engaging in taxable crypto activities must:
Be registered with KRA
File relevant returns
Keep proper records of digital asset transactions

Glossary

Capital Gains Tax – Tax on profits from the sale of property or investments.
Capital Markets Authority – Regulates Kenya’s capital markets.
Airdropped Tokens – Free tokens distributed to wallet addresses.
NFTs – Unique digital assets stored on a blockchain.
Stablecoins – Cryptocurrencies pegged to a stable asset like fiat currency.
AML/CFT/CPF – Acronym for Anti-Money Laundering/ Combating the Financing of. Terrorism/ Countering Proliferation Financing. Legal frameworks to prevent money laundering and terrorism financing.
FSCA – Financial Sector Conduct Authority (FCFA) is an independent South African institution responsible for regulating and supervising the non-banking financial sector, with a primary focus on protecting consumers and promoting financial stability.