Kenya wants to protect its consumers through crypto taxation.
Crypto Taxation in Kenya
It’s estimated that 8.5% of Kenya’s population owns cryptocurrency. The country is ranked first for P2P cryptocurrency trading volume. It’s also fifth for total cryptocurrency activity in the world, according to this report.
With those numbers, it’s no wonder that Kenyan lawmakers are debating whether or not to have a law that would tax crypto. If the law would be approved, the government could tax over 4 million who own different cryptocurrencies.
Capital Markets Bill 2022
The bill seeks to tax exchanges, as well as digital wallets. It will also impose transaction taxes similar to excise duty on bank transactions.
Every time Kenyans will sell or use their digital currencies in a transaction, they pay the government for any capital gains for the increased value of the crypto.
In that case, if they are engaged in the crypto business, they are liable for income tax on their earnings. This is the first time the country will bring crypto mainstream. The bill would also extend regulation relating to digital currencies.
Cryptocurrencies are not regulated in Kenya and even in developed countries. But it’s difficult for any government to regulate it.
Because there’s no central authority that sets the supply of tokens, it’s difficult to regulate cryptocurrencies. Blockchain transactions can be recorded without third-party interference.
It’s one reason China took down cryptocurrency exchanges in the country. It also shut down miners through land use regulations.
Regulating cryptocurrencies will also be difficult because the transactions are done over a P2P network. There are various cryptocurrencies available making it more complex for the government to regulate them.
But it’s still possible to regulate it. One way is to tax fiat money being used to cash out the token. However, this will only apply to a particular token. And the owner of the crypto will only use another coin to cash out.
Early adopters of crypto prefer it as a way for them to pay for basic goods and services.
Because cryptocurrency is not regulated, many are still wondering how safe they are. But for early adopters, this unregulated world is good because transactions can’t be faked.
Furthermore, users remain anonymous until they exchange their tokens. The currencies also have a set supply. Then, if you wish to invest in it, you can easily execute a smart contract without the use of third parties. In that case, you will have to deal with fewer transaction fees.
Then again, the value of cryptocurrencies is volatile. The majority of cryptocurrencies are facing scalability issues. Most blockchain networks can’t keep up with the demand.
If there’s regulation, can it be good for investors? According to experts, investors must welcome it. The reason for this is that regulation can make the crypto market more stable. It protects investors. Thus, it’s a good thing.
However, many enthusiasts oppose new regulations. For them, it would only hinder innovation. It is also against the nature of cryptocurrency. If it is regulated, it is no longer decentralized.