Kenya’s Crypto Tax Overhaul: A Game-Changer for Digital Assets?

Kenya’s cryptocurrency landscape is undergoing a massive transformation. In a decisive move, Parliament has scrapped the controversial 3% Digital Asset Tax (DAT) on every crypto transaction, replacing it with a 10% excise duty applied only to service fees charged by exchanges and digital asset platforms.

This overhaul, finalised in June 2025, aims to inspire innovation, boost adoption, and position Kenya as a leading hub for virtual assets in Africa. But is this the spark Kenya’s crypto ecosystem needs to go mainstream?

The Old 3% Crypto Tax: A Barrier to Growth

Introduced under the Finance Act of 2023, the 3% DAT was levied on the gross fair market value of every cryptocurrency transfer or exchange.

Industry players, including the Blockchain Association of Kenya (BAK) and the Virtual Assets Chamber of Commerce (VACC), criticised it as overly repressive, arguing it taxed transactions regardless of profit or loss.

Allan Kakai, a director at VACC, likened it to taxing cash deposits, calling it “discriminatory” and misaligned with global standards.

The tax’s structure created practical challenges. Crypto platforms were required to remit the DAT within five working days, but the Central Bank of Kenya (CBK) barred them from operating bank accounts, leaving collected taxes unremitted.

This limitation frustrated operators and discouraged sector growth. A 2023 Chainalysis report ranked Kenya 21st globally for crypto adoption, with 8.5% of the population (4.25 million people) owning digital assets, highlighting the market’s potential despite regulatory hurdles.

READ ALSO:Is Kenya’s Banking Sector About to Go Blockchain?

The New 10% Excise Duty: A Fairer Approach?

In June 2025, Parliament passed amendments to the Finance Bill 2025, reducing the DAT to 1.5% initially and then shifting to a 10% excise duty on service fees charged by virtual asset service providers (VASPs).

This shift, awaiting presidential assent as of June 23, 2025, targets fees rather than entire transaction amounts, aligning crypto taxation with conventional financial services like bank transfers.

For example, if a crypto exchange charges a 0.5% fee on a $1,000 Bitcoin trade ($5), the 10% excise duty would apply only to that $5 fee, resulting in a $0.50 tax.

Under the old 3% DAT, the same $1,000 transaction would have incurred a $30 tax, regardless of the fee or profit. This dramatic cost reduction is expected to encourage trading, remittances, and peer-to-peer (P2P) transactions, which have driven Kenya’s vibrant crypto economy.

Regulatory Framework: The Virtual Asset Service Providers Bill 2025

The tax overhaul coincides with Kenya’s push to regulate virtual assets through the Virtual Asset Service Providers (VASP) Bill 2025, tabled in Parliament on April 4, 2025, and the Draft National Policy on Virtual Assets.

These frameworks, developed by the National Treasury, CBK, and Capital Markets Authority (CMA), aim to balance innovation with consumer protection and compliance with global anti-money laundering (AML) and counter-terrorism financing (CFT) standards set by the Financial Action Task Force (FATF).

Key features of the VASP Bill 2025 include:

• Licensing Requirements: All VASPs, including exchanges, wallet providers, and tokenisation platforms, must obtain licences from the CBK, CMA, or Communications Authority (CA), depending on their services. Existing providers have a six-month transition period post-enactment.
• Consumer Protections: VASPs must maintain bank accounts in Kenya, obtain insurance policies, and segregate client assets from personal or non-client assets to safeguard users.
• AML/CFT Compliance: Regulators can vet shareholders, conduct inspections, and enforce penalties for non-compliance, addressing Kenya’s 2024 FATF grey listing for inadequate virtual asset oversight.
• Corporate Restrictions: Only legal entities (not individuals) can operate as VASPs, with boards requiring at least two natural persons as directors.

The bill also prohibits anonymity-enhancing services like mixers or tumblers, which cover up transaction origins, to curb illicit activities. These measures aim to enhance trust and legitimacy, potentially attracting foreign investment.

Opportunities for Kenya’s Crypto Ecosystem

Kenya’s crypto market thrives on high adoption, driven by remittances, P2P platforms like Binance, and a tech-savvy youth demographic. The tax reduction could:

• Boost Transaction Volumes: Lower costs may increase trading and cross-border payments, especially for Kenya’s diaspora, which relies on crypto for remittances.
• Attract FinTech Investment: Regulatory clarity and a competitive tax regime could attract global exchanges to set up local operations, creating jobs.
• Enhance Financial Inclusion: Affordable crypto transactions could bring unbanked populations into the digital economy, aligning with Kenya’s digital finance goals.

A 2024 report noted Kenya’s crypto sector generated KES 10 billion ($77 million) in taxes in 2023-2024, with projections of KES 60 billion ($464 million) annually if growth continues.

READ ALSO:How Will Physical Offices and Local CEOs for Crypto Firms Operating in Kenya Change the Crypto Landscape

Is Kenya’s Crypto Overhaul a Game-Changer?

Kenya’s tax and regulatory reforms signal a shift from scepticism to strategic embrace of virtual assets. However, success will depend on execution.

Clear regulatory roles, affordable compliance, and public education are critical to sustaining momentum. While the overhaul is promising, it’s too early to call it a game-changer. Stay tuned as Kenya navigates this bold new frontier.

Ronnie Paul is a seasoned writer and analyst with a prolific portfolio of over 1,000 published articles, specialising in fintech, cryptocurrency, and digital finance at Africa Digest News.