Kenya’s cryptocurrency adoption to see further growth
Kenya is known to recognize the full extent of cryptocurrency, from digital finance to entertainment. Kenya’s Finance Bill 2023, for instance, introduced taxes affecting digital content creators and crypto traders.
Content creators now face a 1.5% withholding tax on earnings from digital content monetisation, down from the proposed 15%. The law targets income from website ads, social media promotions, brand sponsorships, and other digital revenue streams.
Crypto traders are subject to a 3% Digital Asset Tax (DAT) on the value of transferred or exchanged digital assets. The law broadens the definition of ‘fees’ for digital lenders, leading to increased costs for borrowing from popular loan apps like Branch and Tala.
The country is also known to allow many trusted online betting platforms that offer a zero-risk betting strategy. Zambia has a liberal approach to betting, supported by laws like the Lotteries Act and the Tourism and Hospitality Act.
The rise in internet penetration to 28% from 6.5% in the past decade also boost online gambling’s popularity in the country. The platforms swiftly adapt to Kenyan cryptocurrency demand by adopting it as a preferred payment method.
Crypto adoption
Often termed “Silicon Savannah”, Kenya is an avid adopter of technology like Web3 with 85% of Kenyans owning smartphones. Triple-A data shows Kenya trails Nigeria in African crypto ownership. In 2023, CoinGecko ranked Kenya 15th globally and among the top African crypto-interested countries.
The regulatory stance on crypto is shifting from negative to welcoming. The Kenyan Parliament discussed cryptocurrency regulations in 2023. Cryptocurrencies in Kenya serve as value stores, for remittances, speculation, and digital content like NFTs.
Popular crypto platforms in Kenya include Binance, Paxful, YellowCard, and LocalBitcoins. Binance leads in peer-to-peer trading, offering mobile money and bank transfers.
They’re used in e-commerce, remittance services, and by freelancers to bypass high banking fees. Educational programs targeting university students are also common. Startups like Grassroots Economics use blockchain to create community currencies. This move aims to support local trade and mitigate economic shocks.
Statista predicts Kenyan cryptocurrency revenue will reach US$26.9m by 2028, with user numbers expected to grow from 7.80% to 9.07%.
More protection for users
Kenya thrives as a regional business hub with strong global trade links, but it comes with a cost. It faces increased vulnerability financing due to its geo-positioning, especially concerning money laundering and terrorism.
The Eastern and Southern Africa Anti-Money Laundering Group assessed Kenya’s AML/CTF system in September 2022. Some key findings raised concerns about money laundering and terrorism financing risks in the country.
The Financial Action Task Force (FATF) gave Kenya a year to address identified deficiencies. The Kenyan government is currently drafting new regulations in response. A technical group advising the Treasury is finalising the draft rules to be sent to the Cabinet for approval.
Saitoti Maika, director-general of the Financial Reporting Centre (FRC), said the draft aims to establish rules and identify the regulator for digital asset providers.
“Probably, we may end up with a stand-alone regulator for virtual assets,” he said.
Based on these drafts, the FRC will address risks of money laundering and terrorism financing from unregulated cryptocurrency use. When done right, it will keep Kenya out of FATF’s grey list.
“The concern has been that Kenyans are trading and yet we don’t know, as a country, to what extent the proceeds that flow in this space are likely to get into the financial system. We
are being reminded that as we become more sophisticated as a country, we have to deal with the risks,” said Maika.
“We can’t bury our heads in the sand. The more we fail to regulate, the more we risk being punished.”
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