The United Nations has asked Kenya and other developing countries to regulate and tax the cryptocurrency industry to limit exposure to the meltdown in the crypto market and risks of financial instability.
A policy brief by United Nations Conference on Trade and Development (UNCTAD) wants Kenya to enforce mandatory registration for crypto exchanges and digital wallets and tax transactions to make the sector less attractive.
The Crypto sector has made a stab at a piece of the tax haven pie since the sector is largely unregulated despite its growing popularity.
The UN trade agency now wants Kenya to charge entry fees for crypto exchanges and digital wallets and impose transaction taxes akin to excise duty charged on bank transactions. Banks deduct 20 per cent excise duty on all commissions and fees charged on transactions.
“Require the mandatory registration of crypto-exchanges and digital wallets and make the use of cryptocurrencies less attractive, for example by charging entry fees for crypto-exchanges and digital wallets and/or imposing financial transaction taxes on cryptocurrency trading,” the report says.
Crypto exchanges are platforms operated by companies where investors buy and sell digital tokens such as Bitcoin, Etherum and Tether among other coins.
“Regardless of the reason for the use of cryptocurrencies, crypto exchanges play a crucial role in enabling their broader deployment. Such exchanges function as clearinghouses, intermediating conversions between cryptocurrencies and sovereign currencies,” says UNCTAD.
The agency also wants banks and other financial institutions blocked from holding stablecoins and cryptocurrencies or offering related products to clients.
The UN trade body has further urged the government to restrict or prohibit the advertisement of crypto exchanges and digital wallets in public spaces and on social media to curb the permeation of cryptos.
