Virtual Assets Chamber of Commerce (VACC) Criticizes Kenya’s 3% Tax and Compliance Costs
In a bold move that could shape the future of Kenya’s digital asset sector, the Virtual Assets Chamber of Commerce (VACC) has taken a stand against the country’s high taxation and excessive compliance costs. Their recommendations come in response to the Virtual Asset and Virtual Asset Service Providers Bill 2025, a comprehensive framework presented by the Treasury last month.
VACC, a prominent think tank representing blockchain and virtual asset stakeholders, recently participated in the final public consultation for the 2025 VASP Bill and National Policy Framework. This crucial moment could set a precedent for the entire African continent, as the digital economy continues to expand globally. The VACC emphasized the importance of clear regulations to provide certainty for businesses and investors, ensuring Kenya’s competitiveness in the digital landscape.
However, the organization strongly condemned the proposed 3% tax on digital assets, citing that it far exceeds global standards. Allan Kakai, the director of VACC, warned that such a tax could make the industry unsustainable, jeopardizing both businesses and investors. With tax rates significantly higher than standard exchange fees, the sector faces an uncertain future unless a resolution is reached promptly.
Kenya’s aggressive tax policies have been a point of contention for the past three years, with the current administration imposing higher taxes across various sectors to meet ambitious development targets. Despite public outcry and protests, the government appears resolute in its approach, buoyed by the success of collecting $78 million from fewer than 400 digital asset dealers in 2024.
The challenges faced by Kenya are not unique, as other nations grapple with digital asset taxation. In India, investors face a 30% tax on profits, while South Korea and Italy have encountered public backlash over proposed tax regimes. VACC’s plea for a balanced regulatory framework aligning with global standards, such as the EU’s MiCA framework, reflects a growing trend towards harmonizing regulations in the digital asset space.
Aligning with MiCA and Reducing Compliance Costs
VACC’s recommendations extend beyond tax concerns, urging the Kenyan government to adopt a regulatory approach in line with international best practices. By aligning with frameworks like MiCA, Kenya could streamline its regulations and attract foreign investment, fostering entrepreneurship in the digital asset sector. The implementation of a tiered licensing system could cater to diverse service providers, encouraging a more inclusive ecosystem.
Moreover, the think tank highlighted the need to reduce excessive compliance costs, which deter foreign VASPs from entering the market and squeeze out smaller local players. Drawing parallels with Hong Kong’s experience, where compliance costs soared after the introduction of a new licensing framework, VACC emphasized the importance of clear definitions and guidelines to promote financial inclusion and economic efficiency.
Stablecoins have emerged as a popular alternative in Kenya and other African nations, offering a solution to cross-border payment challenges. The International Monetary Fund’s recent report indicated a surge in stablecoin usage, driven by the need for smooth and efficient digital transactions. In Uganda, the launch of KitePesa, a local stablecoin pegged to the Ugandan shilling on the BSV blockchain, exemplifies the growing trend towards localized payment solutions.
As the digital asset landscape evolves, the call for balanced regulations, reduced compliance costs, and clear guidelines becomes increasingly urgent. Kenya’s response to these recommendations could shape its position in the global digital economy and pave the way for innovation and growth in the sector. The time for action is now, as stakeholders navigate the complexities of taxation, compliance, and technological advancement in the digital asset space.
