The government of Kenya plans to impose a 3% tax on cryptocurrency transfers to reduce the country's budget deficit and increase its domestic revenue.
Kenya is among the leaders on the African continent in terms of crypto adoption. Patrick Njoroge – Governor of the Central Bank – has previously suggested that bitcoin could solve the nation's problems with its depreciated official currency.
Crypto Included in New Bill
As reported by Bloomberg, Kenyan lawmakers could implement a 3% tax on the transfer or exchange of cryptocurrencies, while a 15% levy could affect creators of monetized online content.
The proposal is part of a newly designed bill that could stabilize the financial situation of the African nation. President William Ruto aims to double tax revenue to 5 trillion shillings (about $37 billion) in five years and use the funds to promote monetary growth.
The legislation will become official from early July if Kenyan lawmakers give their consent. The country estimates its revenue at around $21 billion in the first 365 days (14% more than projected revenue for the current fiscal year).
Kenya ranks among the lower-middle-income economies, with more than 16% of its population living below the international poverty line. Economic inequality, health problems and government corruption are the main factors behind the negative trend. Despite its problems, it remains one of the most developed countries in East and Central Africa.
Kenya: the African leader in cryptography
Contrary to the country's financial woes, a significant number of Kenyans have turned to the cryptocurrency industry over the past few years.
Research conducted by the United Nations (UN) in the summer of 2022 estimated that 8.5% of the population (over 4 million individuals) were HODLers: the highest adoption rate in Africa. South Africans (7.1%) and Nigerians (6.3%) complete the top 3 list.
However, the UN could not determine the approximate value of digital assets held by Kenyans due to the lack of comprehensive regulation in the industry:
“Returns from trading and holding cryptocurrency are, as with other speculative transactions, very individual. Overall, they are overshadowed by the risks and costs they pose in developing countries. The sector is unregulated in the country and remains largely unregulated even in the developed world.
It should be noted that the central bank of Kenya has a somewhat positive stance on bitcoin (unlike many other centralized financial institutions around the world). Governor Njoroge suggested in 2021 that the adoption of the leading cryptocurrency could ease the financial turmoil that hit the region shortly after the COVID-19 pandemic.
“Our decision to switch to Bitcoin is both tactical and logical. Our currency has always been the punching bag of the IMF, which always claims that the Kenyan shilling is overvalued. It has put too much pressure on the Kenyan shilling, and it is having a negative effect on the economy,” he said.