Virtual Asset Stakeholders Engage PwC to Propose Comprehensive Virtual Asset Tax Reforms for Finance Bill 2025

By Phyllis KONRAD

A coalition of leading virtual asset stakeholders, championed by Busha, Kotani Pay, Luno, HoneyCoin, Swypt, and DurraFx representing a wider group of blockchain and cryptocurrency players, in collaboration with PwC, today presented groundbreaking proposals to the National Assembly Committee on Finance and National Planning regarding the taxation of virtual assets under the Finance Bill, 2025.

The comprehensive submission captures insights from a wide range of participants in Kenya’s blockchain ecosystem—from developers and startups to multinational corporations—ensuring inclusive representation of the entire sector’s position regarding digital asset taxation and the industry’s long-term survival.

Key Proposals for Virtual Assets Tax Reform

The comprehensive submission outlined three critical proposals designed to modernise Kenya’s approach to digital asset taxation:

Repeal of Specialised Digital Asset Tax Regime The stakeholders proposed the complete deletion of Section 12F of the Income Tax Act (ITA), which currently establishes a specialised taxation regime for digital assets.

The current framework has been problematic due to its failure to recognise losses and volatility inherent in digital assets, its disproportionately harsh treatment compared to other property forms, and the high likelihood of double taxation in digital asset transactions.

Integration of Digital Assets into Standard Property Tax Framework The proposal recommends amending the definition of ‘property’ under the Eighth Schedule of the ITA to include digital assets explicitly.

This amendment would ensure that virtual assets are taxed under normal property disposal rules, including Capital Gains Tax and business income provisions, promoting equality and fairness across different asset classes.

Recognition of Virtual Asset Service Providers (VASPs) as Financial Institutions The submission advocates for including VASPs under the definition of financial institutions for both VAT and Excise Duty purposes.

This would provide tax exemptions similar to traditional financial institutions and prevent cascading VAT charges that could stifle innovation in the digital finance sector.

Industry Leadership and Collaborative Approach

The stakeholder coalition represents a comprehensive cross-section of Kenya’s virtual asset ecosystem, bringing together established platforms, innovative startups, and technology builders to advocate for regulatory clarity that supports innovation while ensuring compliance.

“Technology dies or thrives on the altar of law and policy. Fundamentally, as an industry, we would prefer to be regulated in terms of the offered service and not the underlying technology,” said Keega Gakuua, Managing Partner at Keega & Co Advocates & Head of Legal at Swypt.

The international perspective was equally emphasised, with insights from operators who have navigated regulatory frameworks across Africa.

“As Nigeria’s first licensed exchange, we’ve seen how smart regulation drives crypto adoption. Kenya can lead Africa’s blockchain future with the right tax framework,” noted Chebet Kipingor, Business Operations Manager at Busha.

The presentation highlighted Kenya’s vibrant virtual asset ecosystem, which includes exchanges, wallet providers, miners, validators, and token issuers. Virtual assets are increasingly popular among Kenyan youth aged 18-40, who use platforms like Binance, Coinbase, and Aza Finance for investment, remittances, and online transactions.

“We appreciate the ongoing efforts to regulate Virtual Asset Service Providers (VASPs) in Kenya, which are key to nurturing the local startup and developer ecosystem. As the Silicon Savannah, Kenya is well-placed to lead responsible technology growth.

We welcome continued dialogue with all stakeholders to shape a safe, innovative, and inclusive digital future together,” said Felix Macharia, CEO of Kotani Pay.

Growing Digital Asset Landscape in Kenya

The proposed reforms aim to align Kenya’s tax framework with international best practices while ensuring:

• Tax Neutrality: Equal treatment of digital and traditional assets
• Innovation Support: Removal of barriers that could hinder fintech development
• Consumer Protection: A Clear regulatory framework that protects investors
• Revenue Optimisation: Efficient tax collection without stifling growth

Alignment with International Best Practices

The reforms are expected to:

• Promote financial inclusion through clearer regulatory frameworks
• Attract international investment in Kenya’s fintech sector
• Support the growth of blockchain and cryptocurrency businesses
• Enhance transparency in digital asset transactions
• Create a level playing field for all market participants

 

Next Steps

The National Assembly Committee on Finance and National Planning will review these proposals as part of the Finance Bill, 2025 deliberations. The stakeholders emphasised the urgent need for these reforms to position Kenya as a leading destination for digital asset innovation in Africa.

The submission represents a collaborative effort between legal experts, tax professionals, and industry stakeholders committed to creating a robust regulatory environment that balances innovation with fiscal responsibility.