Bitcoin Adoption in Kenya’s Kibera Slum Faces 3% Tax Threat

Bitcoin has emerged as a preferred payment method in Kibera, Kenya’s largest slum, due to its safety, affordability, and speed. Local merchants and community workers have embraced Bitcoin, citing its low transaction costs and enhanced security in a region with high crime rates. This trend underscores the potential of cryptocurrency to promote financial inclusion in areas with limited access to traditional banking services.

However, the future of Bitcoin adoption in Kenya faces uncertainty due to the proposed 3% Digital Asset Tax (DAT) in the Virtual Asset Service Providers (VASP) Bill 2025. This tax, which applies to all crypto transactions regardless of profit or loss, could deter users and drive them towards unregistered offshore platforms. Experts warn that such a high tax rate could stifle innovation and push traders offshore, similar to the impact seen in India and Indonesia.

Kenya, with 6 million crypto users, is ranked 21st out of 155 countries in the crypto adoption index, making it one of Africa’s largest Bitcoin markets. The proposed tax, if implemented, could significantly affect this adoption rate. Local mobile payment service M-Pesa, which charges 0.04% to 1% of the total amount sent, offers a more cost-effective alternative compared to the proposed 1.5%-3% crypto tax.

Despite the potential challenges posed by the proposed tax, the adoption of Bitcoin in Kibera highlights the transformative power of cryptocurrency in underserved communities. The local community’s embrace of Bitcoin for everyday transactions, from groceries to utility bills, demonstrates how digital currencies can provide safer, cheaper, and faster payment alternatives. This shift has also empowered individuals and communities, fostering a micro-economy within Kibera that showcases the potential of cryptocurrency to drive positive change.