Key Points
- Bitcoin adoption is increasing in Kenya, particularly in informal settlements and slums.
- A proposed 3% crypto tax in the country could hinder this growing adoption.
Bitcoin’s popularity as a payment method is on the rise in Kenya, even in the country’s largest slum, Kibera. The cryptocurrency’s safety, affordability, and speed are attracting local merchants and community workers who now accept Bitcoin payments.
Reasons for Bitcoin Adoption
When asked why they chose to accept Bitcoin, a grocery seller stated that it was because of its affordability, speed, and lack of transaction costs. Another community worker in waste management expressed a preference for Bitcoin payments due to its safety, especially considering the high crime rate in the slum. These sentiments underscore the financial inclusion potential of Bitcoin and other cryptocurrencies, particularly in areas with limited access to traditional banking.
However, this growing enthusiasm and adoption might be threatened by a proposed 1.5% crypto tax in the Virtual Asset Service Providers (VASP) Bill 2025.
Impact of Proposed Crypto Tax
Regulators believe that the bill will provide much-needed clarity in a sector that has attracted global players like Binance, Bybit, and Bitget. But the bill also proposes a flat 3% Digital Asset Tax (DAT) on all crypto transactions, regardless of profit or loss. Even though a 50% tax cut to 1.5% DAT has been suggested, experts warn that such a levy could drive traders offshore and stifle innovation.
Rufas Kamau, Lead Market Analyst at regional broker FXPesa, criticized the bill in a CNBC interview, stating that the proposed tax would make it impossible for traders to make a profit. A similar 1% crypto tax in India led to a nearly 90% drop in trading volume, prompting industry players to call for a tax reduction to 0.1%.
Kenya, with 6 million crypto users (10% of the population), could face a similar fate. According to Chainalysis’ crypto adoption index, Kenya ranks 21st out of 155 countries, making it one of Africa’s largest Bitcoin and crypto markets. However, if the proposed 1.5%-3% tax is adopted, these users might turn to peer-to-peer (P2P) and unregistered offshore platforms.
Bitcoin has provided Kenyans with a safer, cheaper, and instant payment alternative. However, the proposed crypto bill could affect its adoption.
