Holders of virtual assets such as cryptocurrency and blockchain-based tokens are raising alarm over what they describe as unfair and punitive tax treatment compared to traditional forms of property.
A coalition of local and international stakeholders, in submissions to the Finance and National Planning Committee said that Kenya’s current tax regime fails to accommodate the unique nature of virtual assets, treating them more harshly than physical or traditional financial assets.
To rectify this imbalance, the coalition of digital finance stakeholders, want Section 12F of the Income Tax Act repealed, which imposes a separate and specialised tax regime on digital assets.
They argue that this section does not account for the volatility and loss potential inherent in virtual assets and increases the risk of double taxation.
“Virtual assets should not be penalised simply because they’re new or technology-driven. Tax neutrality is essential to support a fair investment environment,” said head of legal at Swypt, Keega Gakuua.
The investors in the cryptocurrency market want among others parliament to reduce the Sh10 million fine prescribed in the Virtual Asset Service Providers (VASPs) Bill, 2025, arguing it is excessively punitive.
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Instead, the coalition is advocating for digital assets to be integrated into the standard property tax framework, under the Eighth Schedule of the Income Tax Act.
This would bring crypto assets in line with traditional asset classes like real estate and shares, ensuring taxation through existing Capital Gains Tax and business income provisions.
“We are fully aligned with the government’s aim to regulate digital finance responsibly. But regulation must be thoughtful, inclusive, and aligned with international best practices. This is about securing Kenya’s leadership as the Silicon Savannah,” said CEO of Kotani Pay Felix Macharia.
The submissions by major players including Busha, Kotani Pay, Luno, HoneyCoin, Swypt, and DurraFx, are further pushing for the formal recognition of Virtual Asset Service Providers (VASPs) as financial institutions for VAT and Excise Duty purposes.
Without this recognition, stakeholders warn, the sector faces multiple layers of taxation that traditional banks and financial services are exempt from—potentially stifling innovation.
“We’ve witnessed firsthand how smart, adaptive regulation can foster adoption in places like Nigeria,” said Chebet Kipingor, Business Operations Manager at Busha. “Kenya has the opportunity to set a gold standard for Africa in digital asset regulation.”
The submission draws from a broad base of Kenya’s digital economy—ranging from developers and fintech startups to large-scale exchanges and wallet providers.
With young Kenyans aged 18–40 driving adoption through platforms like Binance, Coinbase, and Aza Finance, the industry is calling for a tax structure that promotes, rather than hinders, innovation.
The proposed law, developed by the National Treasury, Capital Markets Authority (CMA), and the Central Bank of Kenya (CBK), aims to offer legal clarity and consumer protection in a sector growing rapidly both locally and globally.
Over 20 firms are operating in Kenya’s virtual asset space, but in a regulatory grey area. Legislators like David Mboni, MP, Kitui Rural, argue that clear laws are overdue.
If passed Kenya will join countries like Nigeria and South Africa in formalising digital finance laws.
Virtual assets include cryptocurrencies like Bitcoin and Ethereum, tokenized securities, and blockchain-based currencies. Though intangible, they hold real economic value and are widely used for investment, trade, and remittances.
