Regulate crypto industry to curb tax evasion, fraud

Kenyan retail investors held cryptocurrencies worth an average of Sh2,076 ($16.08) each last year. FILE PHOTO | SHUTTERSTOCK

The proposed legislation seeking to have the cryptocurrency industry players pay their fair share of taxes is a step in the right direction.

While the sector remains largely unregulated, there is an urgent need to prevent it from becoming a legal path for tax evasion and fraud.

Kenya can pick lessons from other jurisdictions such as the United States and India that have passed laws that require exchanges and crypto traders to pay taxes.

In the US, for instance, crypto exchanges and brokers are required to notify the Internal Revenue Service (IRS) of transactions. Users are required to pay capital gain tax on earnings when they sell digital coins.

As the National Assembly debates the Capital Markets (Amendment) Bill, 2022, MPs can pick some important lessons from the countries that have successfully started taxing the sector.

But the scrutiny of the industry should not end with the passing of the Bill to allow the Kenya Revenue Authority to go after the crypto or digital currency owners.

We also believe that the fast-rising crypto industry also needs to be regulated.

Kenya has the highest proportion of crypto-owning citizens in Africa and millions are at risk of losing fortunes in the event of a total collapse.

While crypto backers have in the past opposed regulations, it is our position that regulating the industry could bring more stability in an emerging industry characterised by wild price swings and opaque processes that have been used by some criminals to launder money.

Regulation would protect investors from fraudulent activities that have seen people lose their crypto holdings.

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Note: The results are not exact but very close to the actual.