Author: Staff

Kenya’s move towards regulating cryptocurrencies took a significant step as a bill categorizing crypto assets as securities and introducing capital gains tax on them passed a crucial stage in a parliamentary committee. The Capital Markets (Amendment) Bill, 2023, has received approval from the National Assembly’s Finance and National Planning Committee and is set for introduction in the lower chamber of parliament.

Chairman of the Committee, Kimani Kuria, emphasized the bill’s importance in safeguarding the country against financial crimes and terrorism financing. He highlighted the urgency, stating, “Cryptocurrencies are already being traded by millions of Kenyans yet we have no law to govern it. We approve this Bill for publication.”

Following the Committee’s endorsement, the bill progresses to the National Assembly for reading and deliberation. If enacted, the Capital Markets (Amendment) Bill, 2023, would bring changes to the tax code, enforcing taxes on crypto assets held in exchanges and digital wallets. The proposed framework outlines capital gains taxation when Kenyans sell or utilize cryptocurrencies in transactions. Specific details of the bill remain undisclosed, but reports indicate that banks might be required to levy a 20 percent excise duty on transaction fees and commissions.

Under the prospective law, Kenyan citizens would be mandated to declare their crypto assets and their corresponding values in Kenyan shillings to the Kenya Revenue Authority. An excerpt from the bill specifies, “A person who possesses or deals in digital currency shall provide the Authority with the following information for tax purposes—the amount of proceeds from the transaction, any costs related to the transaction, and the amount of any gain or loss on the transaction.”

While Kenya prepares to implement crypto-related taxes, tax authorities in various nations have intensified efforts to track undeclared crypto assets. Notably, the UK’s tax service, HM Revenue and Customs, has recently demanded disclosures of undeclared crypto holdings spanning several years.

128 crypto exchanges have submitted applications for licenses in South Africa, according to the recent announcement by the country’s Financial Sector Conduct Authority (FSCA) on November 30. This update was shared during a presentation aiming to provide insights into the licensing process for cryptocurrency services in the country.

In a significant move back in June, South Africa took the pioneering step on the continent by making it mandatory for crypto exchanges to obtain licenses. The FSCA mandated that all crypto exchanges operating within the country must secure licenses by the end of 2023.

The deadline for crypto service providers to apply for the license ends today. As of November 30, the FSCA confirmed receiving 128 applications, signaling the keen interest within the crypto community to comply with the regulatory framework.

Earlier directives from the FSCA required digital asset exchanges to undergo the licensing process by the end of this year, aiming to safeguard the interests of investors. Commissioner Unathi Kamlana had set November 30 as the deadline for exchanges to acquire the necessary license. Reports from July indicated that around 20 license applications had been submitted by that time, with expectations of more to follow before the deadline.

Kamlana emphasized that failure to operate with a valid license post-deadline would prompt the regulator to take enforcement actions, which could include fines or even closure for non-compliant firms. Expressing concern about potential risks to financial consumers, Kamlana highlighted the importance of implementing a regulatory framework for crypto products. The commissioner stressed the need for time to assess the effectiveness of these measures and assured ongoing collaboration with the industry to refine and implement necessary changes.

As the deadline approaches, the FSCA has noted that among the total applications received, nineteen were withdrawn due to a lack of experience and appropriate operational policies and procedures. Presently, 74 applications remain under consideration, with a breakdown revealing ongoing assessments and pending reviews scheduled for future licensing committee meetings in 2024.

The FSCA has outlined specific criteria for evaluating these applications, focusing on various aspects such as market services provided, operational policies, and compliance measures like KYC, data protection, cyber risk management, and conflict resolution.

South Africa has been proactive in embracing blockchain technology and its potential. Notably, the country recently joined a group of 47 nations committed to adopting a taxation standard aimed at monitoring and taxing earnings from crypto, NFTs, and other digital assets by 2027. The South African Revenue Service (SARS) welcomed the taxation standard developed by the OECD, aiming to facilitate the exchange of tax-relevant information to combat tax evasion.

These developments underscore South Africa’s efforts to lead among its African counterparts by implementing regulations and leveraging blockchain technology for national development, attempting to stay ahead of countries like Nigeria and Kenya in this evolving landscape.