The Capital Markets (Amendment) Bill, 2023, sponsored by Mosop M Abraham Kirwa, is introducing significant changes in Kenya’s approach to cryptocurrency transactions. On December 4, the bill, which defines crypto assets as securities and includes a capital gains tax for them, was passed by the Parliamentary Committee. The bill must now be introduced in the lower chamber of Parliament for approval.
The proposal to amend the Capital Markets Act, Cap 485, seeks to regulate trading in cryptocurrencies and safeguard against proceeds of criminal activity and terrorist financing. Molo M Kimani Kuria, who chairs the parliamentary committee, stressed the importance of the bill during the pre-publication review: “This is a very critical law that will guard our country against the proceeds of crime and terrorism financing. Cryptocurrencies are already being traded by millions of Kenyans, yet we have no law to govern it. We approve this Bill for publication.”
The amendment will set up a framework to govern the trading of cryptocurrency in Kenya. The capital gains tax and excise tax on all fees and commissions related to transactions will be similar to those charged by banks on their traditional transactions. The proposed amendment also outlines ownership rules and measures to encourage innovation.
Kenya is taking a proactive position in the adoption of cryptocurrencies, similar to the pioneering approach of other African countries like South Africa and Nigeria. The largely unregulated cryptocurrency sector makes it difficult to determine the value of digital assets owned by individuals. The Bill requires individuals who deal in digital currency to provide the Capital Markets Authority with specific tax information.
The importance of cryptocurrencies was stressed by Mr. Kirwa: “Cryptocurrency is the future. This will be the norm because we will buy and sell using cryptocurrencies.” He urged Kenya to take a proactive position and legalize cryptocurrencies. The proposed amendment details specific provisions that govern digital currency transactions, such as their creation via crypto mining, regulation for trading digital currencies and taxation protocols. It also examines the environmental impact of crypto-mining and digital currency creation.
