Kenya’s 1.5% crypto tax could splinter Africa’s fintech unity, risk $1B sector

Kenya’s newly proposed 1.5% tax on every cryptocurrency transaction could have far-reaching consequences beyond national borders. As Africa’s digital economy grows under the banner of the African Continental Free Trade Area (AfCFTA), Kenya’s unilateral tax move risks breaking that shared momentum. With the continent aiming to operate as a unified digital market across 54 nations, any disruption in regulatory harmony—especially from a regional tech leader like Kenya—could fragment cross-border innovation and investment. At the heart of the debate is Kenya’s ambition to boost revenue and regulate an increasingly popular asset class. But critics warn that the new levy could reverse progress by forcing crypto activity underground, deterring international investors, and pushing local talent to jurisdictions with friendlier laws. Freelancers and creators at risk of income loss The tax, introduced through a revised Finance Bill 2025, will charge 1.5% on the gross value of each crypto transaction. While the Kenya Revenue Authority expects this to generate substantial new revenue, the burden falls directly on users—many of whom are freelancers, traders, and artists whose livelihoods depend on digital payments. For thousands of young Kenyans who convert tokens to pay for rent, school fees, or food, the tax could eliminate already slim margins. The same applies to NFT artists, content creators, stakers, and validators who use digital assets in daily commerce. Since many earn in crypto rather than fiat, each transfer—whether peer-to-peer or to exchanges—will now incur a loss through taxation. This move may incentivise users to bypass centralised platforms and turn to informal or even unregulated channels, increasing exposure to fraud and market volatility. According to blockchain analytics, Kenya has one of the highest rates of crypto adoption per capita in Africa, particularly among youth. Disrupting this ecosystem could undo recent financial inclusion gains. Industry calls for phased, privacy-focused rollout Recognising the risks, recent industry submissions to Kenya’s National Assembly Committee on Finance and National Planning, as reported by Cointelegraph , have urged a more measured approach. The proposals call for taxing digital assets under existing capital gains rules, treating them similarly to property disposals rather than levying a blanket transaction fee. This would allow fair taxation without penalising daily users. The submissions have also recommended a phased rollout that begins with education and voluntary compliance, building institutional capacity before enforcing blanket mandates. The argument is that this route would encourage participation, enhance transparency, and minimise the outflow of startups. Privacy also features prominently in these submissions. They propose the integration of public audits and cryptographic proofs as safeguards, addressing concerns that the tax framework may violate data privacy standards. Kenya’s crypto community has already raised alarms over a lack of clarity in how transaction data will be collected and stored. New bill on VASPs could add regulatory pressure In parallel, Kenya is considering the Virtual Asset Service Providers (VASPs) Bill 2025, which is intended to plug regulatory gaps. The legislation targets anti-money laundering (AML), counter-terrorism financing (CFT), and illicit financial flows. If passed, the bill would establish licensing requirements for crypto exchanges and custodians. However, critics argue that the bill, in its current form, lacks adequate privacy protections. The Finance Bill 2025 has drawn scrutiny, particularly over provisions that could allow the government to access personal wallet data without clear safeguards. This comes at a time when other African nations are experimenting with tokenised financial infrastructure under AfCFTA’s digital blueprint. Kenya’s dual-track approach—imposing tax without harmonised regional coordination—could deter cross-border projects and complicate continental integration. If unaddressed, the combination of high transaction fees and intrusive oversight risks a talent and capital flight from one of Africa’s most promising crypto hubs. The post Kenya’s 1.5% crypto tax could splinter Africa’s fintech unity, risk $1B sector appeared first on Invezz

Source: Invezz