Members of Parliament in Kenya have repealed the previously imposed digital assets tax, which stood at 3% of transaction amounts. The move comes just days after the National treasury proposed to reduce crypto assets tax.
Instead, a new excise duty on transaction fees will be instituted, signaling a move towards a lower-cost environment for users of cryptocurrencies and other virtual assets.
The current taxation regime, introduced in September 2023, mandated a 3% levy on all cryptocurrency transactions. This meant that every time a digital asset was bought, sold, exchanged, or transferred, a 3% tax was charged on the transaction amount. The move was met with criticism from industry players who argued that the tax was discriminatory and hindered the sector’s growth.
The Finance Bill, 2025 initially proposed to halve the digital assets tax from 3% to 1.5%, but subsequent amendments went further, removing the tax altogether. Instead, lawmakers proposed an alternative: a 10% excise duty on transaction fees within the digital assets ecosystem. This change is expected to significantly lower the costs associated with cryptocurrency transactions, encouraging broader adoption across the country.
Kuria Kimani, Chairperson of the Finance and National Planning Committee, articulated the rationale behind the move, stating, “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 further explained, “If you are using say Bitcoin to pay for a service, the law provides that you pay taxes on the transaction amount.”
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The shift from taxing the transaction amount to focusing on transaction fees addresses concerns about fairness and discrimination in the taxation system. Kimani emphasized that the new approach aligns more closely with how other financial services are taxed, where levies are based on fees charged rather than the value of the transaction itself.
Industry stakeholders have welcomed the repeal of the digital assets tax, viewing it as a move that will facilitate widespread adoption of digital currencies in Kenya. Kivindyo Munyao, a tax advocate, noted earlier this year 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.” The removal of the 3% levy is seen as a step towards creating a more conducive environment for innovation and investment in the digital assets space.
To complement this legislative change, the government has also been proactive in establishing an enabling environment for virtual assets. Draft policies such as the National Policy on Virtual Assets and Virtual Asset Service Providers, along with the draft Virtual Asset Service Providers Bill, 2025, are part of the broader strategy to regulate and promote the sector.
Kenya’s New Virtual Assets Framework Emphasizes Cooperation, Regulation, and Innovation
Kenya’s latest policy and legislative efforts aim to establish a comprehensive framework for the regulation and development of virtual assets within the country. The policy outlines a proposed framework for domestic and international cooperation, compliance, customer protection, financial innovation, and management of risks. These measures are designed to foster a secure, innovative, and well-regulated digital assets ecosystem that aligns with global best practices.
The accompanying bill identifies key regulators responsible for overseeing virtual assets providers, notably including the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA). This dual regulatory approach aims to ensure that the sector is effectively monitored and integrated into the broader financial system.
Digital assets are also highlighted as a means of payment within the new regulatory landscape. The legislation establishes a specific licensing category for digital asset payment processing, which will be regulated by the CBK. This move underscores the government’s recognition of digital currencies as legitimate payment instruments and aims to facilitate their safe and regulated use in everyday transactions.
“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,” states Yellow Card, a stablecoin payment infrastructure firm, in its 2025 State of Digital Assets Regulation in Africa report. The firm further notes that “The Kenyan government has also made clear that stablecoins will be regulated in the ecosystem.”
Yellow Card views the stance of Kenyan regulators positively, noting that “The CBK and CMA are supportive of the proposed legislation in contrast to the historical stance on digital assets.” Historically, both regulators have issued caution to the public against the use of unlicensed financial products and services, but the recent legislative proposals signal a shift toward embracing and integrating digital assets into Kenya’s formal financial framework.
This evolving regulatory environment demonstrates Kenya’s commitment to balancing innovation with oversight, aiming to position itself as a leader in digital assets regulation in Africa. The clear delineation of roles for CBK and CMA, along with the recognition of digital assets as a legitimate means of payment, paves the way for a more inclusive and dynamic digital economy in the country.
