The Kenyan government is gearing up to tax digital transactions, particularly cryptocurrency transactions, in a bid to curb tax evasion and plug revenue leaks. The Kenya Revenue Authority (KRA) plans to implement a digital system to capture crypto transactions, citing significant losses in tax revenue due to unregulated crypto activities.

The move comes as cryptocurrency trading gains popularity in Kenya, with an estimated four million users, making it one of the largest markets in Africa. Despite its benefits, the decentralized and pseudonymous nature of cryptocurrencies has created opportunities for tax evasion.

In December 2023, Kenyan lawmakers advocated for a law to tax the country's crypto traders, with the aim of taxing an estimated four million Kenyan cryptocurrency traders. The government halted the Worldcoin cryptocurrency project in October 2023 due to privacy concerns, but the project is set to make a comeback in East Africa's largest tech market.

The KRA plans to implement a new real-time tax system integrated with cryptocurrency exchanges, allowing it to monitor crypto transactions and collect taxes. The lack of a robust system to collect taxes on cryptocurrency transactions has resulted in significant revenue losses for the government.