Kenya has enacted a new Finance Act 2025, which has repealed the previous crypto tax rules imposed on Digital Asset Service Providers.
According to the now-repealed rules, the service providers were to pay a 3% Digital Asset Tax on the total value of transactions facilitated through them.
However, the new law has introduced new provisions; licensed digital assets service providers will now be taxed an excise duty based on the service fees they charge their users, effectively revoking the former 3% Digital Asset Tax, which focused solely on transaction value.
For individuals and firms, the current laws on income tax and capital gains tax will continue to apply, depending on how their assets are held or used.
In an interview with The Star, Philip Chege, chief marketing officer at GoChapaa, a Kenyan digital finance startup, revealed that the new tax law was a result of open dialogues and engagement between the Kenya Revenue Authority (KRA), regulators, and industry stakeholders.
According to him, the new laws are more practical for businesses.
“The repeal of the Digital Asset Tax and the introduction of excise duty on service fees is a more practical and fair approach; it recognizes how our business models actually work.”
Tax Reforms Align with VASP Act
The country recently enacted its Virtual Assets Service Providers (VASP) Act, which requires all crypto firms to register with the Central Bank of Kenya, conduct Know Your Customer (KYC) procedures, and maintain representation of Kenyans on the boards of crypto firms.
The Act also enforces strong anti-money laundering (AML) and counter-terrorism financing (CTF) measures that are in line with the guidelines from the Financial Action Task Force.
As a leading country in crypto adoption within the region, the enactment of a comprehensive regulation marks a step towards ensuring a proper regulatory and oversight framework, expected to drive crypto adoption beyond retail users.
The new tax rules are an addition to the ongoing policy reforms and changes in blockchain and cryptocurrency adoption within the country, targeted at ensuring a clear and formalized regulatory environment that encourages adoption and innovation.
The Central Bank of Kenya, in collaboration with the Capital Markets Authority, will be responsible for the enforcement and supervision of the new laws.
An Equitable Tax Landscape: The Road Ahead for Kenya
The former laws created a less favorable environment for crypto businesses, especially startups, which were all mandated to pay a fixed amount regardless of the revenue they generated.
The new laws reflect a more equitable approach towards taxation, as businesses are taxed on the income received through their service fees.
This shift will create a more relaxed environment that attracts investors and ensures that businesses continue to thrive.
“Kenya has a chance to lead in building a fair, transparent digital asset ecosystem. With taxation and regulation now taking shape, we can finally focus on innovation, compliance, and expanding access to digital finance across the region,” Chege said.
Kenya has set a precedent for other African countries, such as Nigeria, Ghana, and South Africa, which are in the midst of similar reforms, that there can be a balance between innovation and regulation.
This move positions Kenya as a regional leader in adopting digital asset taxation mechanisms that align with international standards.
It also represents a turning point in Africa’s approach towards crypto regulation, which is expected to foster investor confidence, attract regulated exchanges, and enable better consumer protection.
