MPs drop digital assets tax of 3pc on transactions

The US Internal Revenue Service (IRS) describes digital assets as any resource that can be stored electronically and be bought, sold, owned, transferred or traded.

The Finance Bill, 2025 had proposed to halve the digital assets tax from three percent to 1.5 percent before further amendments axed the tax in its entirety, while proposing an alternative 10 percent excise duty on transaction fees in the digital assets’ ecosystem.

Chairperson to the Finance and National Planning Committee Kuria Kimani deemed the tax as discriminatory as levy on other financial services is pegged on the fees charged and not the turnover.

“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,” he said.

“If you are using say Bitcoin to pay for a service, the law provides that you pay taxes on the transaction amount.”

The digital asset tax was adopted in September 2023, where all cryptocurrency transactions were subjected to a fixed levy rate of 3 percent.

This means that every time a cryptocurrency is bought, sold, exchanged or transferred, a three percent tax is charged on the transaction amount.

The amendment is expected to improve the widespread adoption of digital currencies in Kenya by lowering taxes on transactions. The current taxation regime was criticised by players in the industry who deemed it discriminatory.

“Unfortunately, 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,” Kivindyo Munyao; a tax advocate wrote on the Business Daily earlier this year.

The government has been keen to create an enabling environment for the widespread adoption of digital assets by publishing the draft National Policy on Virtual Assets and Virtual Asset Service Providers and the draft Virtual Asset Service Providers Bill, 2025.

The policy outlines a proposed framework for domestic and international cooperation, compliance, customer protection, financial innovation and management of risks.

The bill meanwhile, identifies key regulators responsible for regulating virtual assets providers including the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA).

Digital assets are also highlighted as a means of payment and establish a specific licensing category of digital asset payment processing which will be regulated by the CBK.

“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,” stable coin payment infrastructure firm Yellow Card says in its 2025 State of Digital Assets Regulation in Africa report.

“The Kenyan government has also made clear that stablecoins will be regulated in the ecosystem.”

The firm sees the CBK and CMA as supportive of the proposed legislation in contrast to the historical stance on digital assets.

The two regulators have in the past issued caution to the public against the use of unlicensed financial products and services.

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