The Capital Markets 2023 (Amendment) Bill, sponsored by a local member of Parliament, is the latest effort to regulate cryptocurrencies in Kenya.
Crypto enthusiasts, draw your seats…
The Capital Markets (Amendment) Bill, 2023 sponsored by Mosop Member of Parliament, Hon. Abraham Kipsang Kirwa. In sum, it seeks to incorporate block chain, crypto & digital currencies into the purview of Capital Markets Authority
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— Julians Amboko (@AmbokoJH) March 28, 2023
The bill by Abraham Kipsang Kirwa wants to incorporate blockchain, crypto & digital currencies into the purview of Kenya’s Capital Markets Authority (CMA), the regulatory body that licenses companies and enterprises to operate in Kenya’s capital markets.
NB: The capital markets of a country typically include the stock market, the bond market, and the currency and foreign exchange (forex) markets.
One of the immediate challenges in the bill is the use of cryptocurrency, digital currency & virtual currency interchangeably.
The bill proposes to amend Section 2 of the Act to incorporate definitions on blockchain, cryptocurrency, crypto miner/mining & digital currency. It also proposes to widen the meaning of ‘securities’ to capture digital currencies.
The bill goes further to propose that for a cryptocurrency to be introduced into the market, the Capital Markets Authority should be satisfied that it was:
- Subjected to product development for at least 2 years
- The product development has a customer base of at least 10,000
Moreover, the bill provides that anyone granted a license for digital currency trading shall:
- Register with the Capital Markets Authority
- Keep a record of all digital currency transactions
- Pay taxes on any gains made from the undertaken transactions
However, when it comes to the stipulation on taxing cryptocurrencies, the proposes that where a digital currency is held for <12 months, income tax applies. Where it’s held for >12 months, capital gains tax applies
The bill is also expecting several disclosures from crypto holders for the purpose of taxation as outlined below. The prospective law would expect holders to disclose to tax authorities:
- The exact amount of cryptocurrency they hold
- The type of crypto held
- Date when the crypto was acquired
- Date when the crypto was sold
- The amount of proceeds from the transaction
- Costs related to the transaction
“This will be a tricky one. Trying to put faces behind digital wallets, that’s not possible. Unlike banks KYC policy, emulating the same for crypto for purposes of tax collection and regulations of markets won’t be easy. Even developed economies haven’t cracked it,” one person said on Twitter.
In 2022, we reported on Capital Markets (Amendment) Bill 2022 by the same Member of Parliament which sought to empower the Kenya Revenue Authority to go after Kenyans that own cryptocurrencies for the purposes of enforcing taxation on their crypto holdings.
The Bill proposes a capital gains tax for the increased market value of crypto during sale or use in a transaction. Currently, banks are mandated to deduct 20% exciste duty on all commission and fees charged on transactions.
In January 2023, Kenya’s Joint Financial Sector Regulators (FSRB), a body which includes the Capital Markets Authority and the Central Bank of Kenya resolved to work on recommendations for the establishment of an oversight framework targeting crypto assets, players, and activities in Kenya.
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