Kenya’s most recent attempt to regulate cryptocurrencies is the Capital Markets 2023 (Amendment) Bill, which has the support of a local member of Parliament
The bill introduced by Abraham Kipsang Kirwa seeks to bring blockchain, crypto, and digital currencies under the jurisdiction of Kenya’s Capital Markets Authority (CMA), the regulatory body that grants companies and enterprises permission to operate in Kenya’s capital markets.
It should be noted that a country’s capital markets typically include the stock market, the bond market, and the currency and foreign exchange (forex) markets.
The bill’s utilization of the terms cryptocurrency, digital currency, and virtual currency interchangeably are one of the bill’s pressing issues.
Section 2 of the Act would be amended to include blockchain, cryptocurrency, crypto miner/mining, and digital currency meanings. It also recommends broadening the definition of “security” to include digital currencies.
The bill goes on to state that before a cryptocurrency can be released into the market, the Capital Markets Authority must be satisfied that it was:
- Subjected to at least two years of product development
- The product development has at least 10,000 customers.
Furthermore, the bill states that anyone who is granted a license to trade digital currencies must:
- Become a member of the Capital Markets Authority.
- Keep track of all your digital currency transactions.
- Pay taxes on any profits made from the transactions.
Even so, when it comes to taxing cryptocurrencies, the proposes that income tax applies if a digital currency is held for 12 months. Capital gains tax applies if it is held for more than 12 months.
The bill also anticipates several disclosures from cryptocurrency holders for taxation purposes, as detailed below. Holders would be required to disclose the following information to tax authorities under the proposed legislation:
- The precise amount of cryptocurrency they possess
- The type of cryptocurrency held
- When the cryptocurrency was purchased
- When the cryptocurrency was sold
- The amount of the transaction’s revenue
- Transaction-related expenses
Someone on Twitter stated that this would be a difficult one. It is not feasible to put faces behind digital wallets.
Unlike banks’ KYC policies, imitating the same for crypto for tax collection and market regulation will be difficult. Even developed economies have not figured it out.
We previously reported on the Capital Markets (Amendment) Bill 2022 introduced by the same Member of Parliament.
It sought to empower the Kenya Revenue Authority to pursue Kenyans who own cryptocurrencies to impose taxation on their crypto holdings.
The Bill proposes a capital gains tax on the steadily increasing valuation of cryptocurrency during a transaction’s sale or use. Banks are currently required to deduct 20% excise duty on all commissions and fees charged on transactions.
Kenya’s Joint Financial Sector Regulators (FSRB), a body comprised of the Capital Markets Authority and the Central Bank of Kenya, agreed in January 2023 to work on recommendations for the establishment of an oversight framework focusing on crypto assets, players, and activities in Kenya.
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