Kenya repeals its digital assets tax. Scrapping the 3% Levy
Kenya’s National Assembly has voted to repeal the 3% digital assets tax that had applied to every purchase, sale, exchange, or transfer of cryptocurrency since September 2023. The decision follows a spirited debate over whether the levy, introduced barely a year ago, was stifling innovation and driving local traders to offshore platforms.
The 3% charge, collected on the full value of each transaction, was unique on the continent and quickly proved controversial. Exchanges, advocacy groups, and independent investors warned that taxing the principal rather than the fee put crypto users at a disadvantage compared with customers of conventional financial products.
From transaction amount to transaction fee
Under amendments to the , Parliament first floated a reduction of the levy to 1.5%. In the committee stage, lawmakers went further, deleting the tax entirely and replacing it with a 10% excise duty on fees charged by exchanges, wallets, and related service providers.
Explaining the pivot, Kuria Kimani, Chairperson of the Finance and National Planning Committee, told colleagues, “This is the equivalent of being taxed for depositing money in your bank. But we are now changing this to not base it on the transaction amount but on the fees charged when you trade using digital assets.”
Kimani added a clarification for day-to-day users: “If you are using, say, Bitcoin to pay for a service, the law provides that you pay taxes on the transaction amount.” In other words, ordinary value-added tax or income tax will still apply where goods or services are exchanged; the new excise duty simply takes the place of the repealed 3% levy.
Industry breathes a sigh of relief
Sector representatives have embraced the shift, calling it fairer and more consistent with how mobile money or card payments are treated. Kivindyo Munyao, a tax advocate who criticised Kenya’s former regime earlier in the year, argued that “the simplified tax regime approach under Section 12F of the Income Tax Act on crypto ignores the elaborate process that is undertaken to realise the value of crypto and the unique transactions that a crypto may be placed into.”
Removing the levy will ease pressure on start-ups that struggled to pass a 3% cost onto price-sensitive Kenyan users. Exchanges that had relocated servers abroad now hint at re-establishing domestic operations, citing a more predictable tax landscape for Kenya.
The broader policy package
Repealing the levy is only one element of Nairobi’s growing digital-assets strategy. The National Treasury has tabled the draft on Virtual Assets and Virtual Asset Service Providers alongside a draft . Together, they sketch out licensing, consumer protection, and anti-money laundering standards.
Central Bank of Kenya and the Capital Markets Authority will serve as joint regulators, bringing crypto trading under formal supervision for the first time. The framework also carves out a specific licence for digital-asset payment processing, recognising tokens as a legitimate means of settlement for goods and services.
Stablecoins in the spotlight
Yellow Card, a pan-African stablecoin infrastructure company, notes in its , “This progressive development reflects a growing recognition of the use of stablecoins and other digital assets as payment mechanisms in Africa, thus bridging the existing gap between digital assets and established national payment systems,” adding that “The Kenyan government has also made clear that stablecoins will be regulated in the ecosystem.”
The same report applauds the cooperation among agencies so far: “The CBK and CMA are supportive of the proposed legislation in contrast to the historical stance on digital assets.” Analysts suggest that Kenya could become a regional hub for dollar-denominated stablecoins that offer a hedge against local currency volatility.
Expected impact on users and treasury
Switching from a 3% transaction levy to a 10% duty on service fees dramatically lowers the effective tax burden for retail users in Kenya. An exchange that charges a 1% trading fee would now collect the excise at a rate of 10% on that 1%, translating into a net 0.1% cost for the trader—thirty times cheaper than the old arrangement.
For government coffers, officials anticipate steadier, if smaller, revenue. Fees are easier to audit than peer-to-peer transfers, and formal exchanges are likely to expand rather than contract under the new rules, broadening the tax base over time.
Regional signal
Kenya joins a short list of African states fine-tuning digital-asset taxation rather than banning or ignoring the industry. Observers in neighbouring Uganda and Tanzania have already begun citing Nairobi’s decision in parliamentary inquiries, arguing for similar fee-based models. The move positions Kenya as a pragmatic jurisdiction that is willing to adjust its policy when evidence shows unintended consequences.
What’s in store
The Finance Bill 2025 now proceeds to the Senate for concurrence before receiving presidential assent. Implementation of the 10% excise duty is slated for the start of the next fiscal year. In parallel, the Virtual Asset Service Providers Bill 2025 will open for public comment, with licensing expected to commence shortly afterwards.
Traders, developers, and international investors will watch how quickly the Central Bank and Capital Markets Authority roll out guidelines, but sentiment has shifted. By scrapping a blunt 3% levy and targeting transaction fees instead, Kenya has signalled that it wants innovation, investment, and consumer protection to grow side by side in its digital economy.
