VACC condemned Kenya’s proposed 3% digital asset tax, stating it exceeds global standards and threatens industry viability. Their recommendations call for regulatory alignment with international practices, lower compliance costs, and clearer stablecoin guidelines to promote financial inclusion and attract investment. The government’s approach faces scrutiny for potentially jeopardizing the growth of the digital asset sector.
The Virtual Assets Chamber of Commerce (VACC) in Kenya criticized the proposed 3% digital asset tax in a recent policy proposal. This follows the introduction of the Virtual Asset and Virtual Asset Service Providers Bill 2025, which aims to regulate the digital asset sector. VACC supports strong regulations for clarity but argues that the proposed tax is excessively high compared to global standards, pointing out its detrimental impact on industry viability.
Allan Kakai, the VACC director, highlighted that the tax is ten to thirty times higher than typical exchange trading fees, making it unsustainable for the industry. He emphasized the urgency for a resolution, warning that such high taxation would hinder growth and reduce the regulatory landscape. The Kenyan government’s tax strategy has seen increased burdens across various sectors since the Kenya Kwanza administration took office, provoking public outrage and protests.
The government has collected $78 million from digital assets through a limited number of dealers, which may embolden it to increase tax expectations. Similar trends in other countries, like India and South Korea, illustrate global struggles with excessive digital asset taxes. Countries are grappling with sector demands for fair taxation, prompting significant industry backlash.
VACC urged the Kenyan authorities to align their regulations with international standards, particularly the EU’s Markets in Crypto Assets (MiCA) framework. This could streamline compliance, reduce costs, and foster entrepreneurship, which are essential for attracting foreign investment and supporting local businesses. The think tank emphasized the need to lower compliance costs, which currently deter foreign players and burden local startups.
Additionally, VACC called for clearer guidelines on stablecoins to ensure they enhance financial inclusion within the economy. The rising popularity of stablecoins in Kenya reflects a regional trend, as they offer solutions amid economic challenges. For example, Uganda has launched KitePesa, a local stablecoin pegged to the Ugandan shilling to facilitate efficient digital payments.
Recent developments around Kenya’s digital asset sector introduce critical changes, focusing on taxation and compliance measures. The introduction of the proposed Virtual Asset and Virtual Asset Service Providers Bill 2025 marks a pivotal point for regulation in this emerging industry. As other nations continue to grapple with similar challenges, Kenya’s approach dictates the level of attractiveness for cryptocurrency and digital asset investments in the region.
The debate surrounding Kenya’s proposed 3% digital asset tax emphasizes the need for balanced regulation that does not stifle industry growth. With increasing compliance costs and high taxation, stakeholders like VACC argue for alignment with global standards. Addressing these concerns is vital for fostering a competitive digital economy while ensuring sensible financial frameworks that support innovation and investment.
Original Source: coingeek.com
