Kenya’s new crypto law vs SA’s regime, who’s getting it right?

Kenya has decided that crypto traders are not the tax department’s punching bag. The country has repealed its blunt 3% digital asset tax on every trade and replaced it with a law that licenses virtual asset service providers, shifts tax onto platform fees, and pulls exchanges into a formal regulatory net. South Africans who follow FSCA’s crypto-asset service provider regime will recognise the pattern: regulators finally stepping in where the hype once did all the talking.

If you already understand how crypto tax works for South Africans, Kenya’s reboot starts to look like a familiar story with a different accent: tax the gains properly, close the reporting gaps, and give platforms clear rules so they can operate without guessing which way the next circular will land.

The question this piece tackles is simple: if you are a South African who's trading, building, or eyeing cross-border opportunities, whose playbook serves you better: Nairobi’s new VASP regime or South Africa’s CASP plus tax combo?

What Kenya has changed

Kenya’s original approach to crypto tax was a pure blunt instrument. The Finance Act of 2023 introduced a 3% digital asset tax on the transaction value of every crypto trade, paid as a withholding tax by the platform. The tax applied to anything classed as a digital asset, including cryptocurrencies and NFTs, and it ignored whether the trader made a profit or a loss.

That meant if you sold KSh100,000 worth of crypto, the exchange had to skim KSh3,000 for the taxman, even if you were underwater on the trade. Traders called it a trade-in, lose-out deal. Platforms grumbled that it killed liquidity and pushed users offshore.

From July this year, that model is gone. Kenya repealed the 3% digital asset tax and replaced it with a 10% excise duty on the fees charged by virtual asset service providers.

Thus, if your exchange fee on that same KSh100,000 trade is 1% (KSh1,000), the tax is now 10% of the fee, which is KSh100. The effective tax bite has dropped from 3% of the trade to 0.1%. The revenue focus has shifted from punishing activity to clipping the middleman.

Alongside the tax shift, Kenya has rolled out a formal VASP law. The VASP Act requires crypto platforms to register with the Central Bank of Kenya, keep physical offices, run proper KYC, and have Kenyan representation on their boards.

It also narrows the definition of what needs a licence by excluding purely closed-loop digital assets that never leave a platform, and sets out what counts as custody, exchange, and transfer services.

Commentators in Kenya are already framing this as a shot at becoming an African crypto hub, with a “come build, but report your homework” vibe.

Kenya is trying to prove you can tax and regulate crypto without strangling it. The strategy is to make life predictable for platforms, lighter for traders, and more transparent for the tax office. That is a very different energy from treating every swap like a sin that needs a 3% confession at checkout.

Where South Africa stands

South Africa took a different path. Instead of inventing a special crypto tax, SARS told everyone to stop pretending their coins lived in a parallel universe. Normal income tax and capital gains tax rules apply. If you trade, stake, mine, or get paid in crypto, the gains and income go on the tax return alongside everything else.

Crypto is treated as an intangible asset, not legal tender, which means SARS looks at intent and facts: long-term holding usually leans toward capital gains, while frequent trading, mining, or running a crypto business pushes you into revenue territory at your marginal tax rate.

SARS has been very clear that “I did it on Binance” is not an excuse. Media releases flagged crypto as a compliance focus and warned that undeclared trades are now firmly on the radar.

On the regulatory side, the FSCA moved first. It designated crypto assets as financial products under the FAIS Act. Any platform offering advice, broking, or custody to South Africans must either be licensed as a crypto asset service provider or fall under a narrow exemption.

The CASP licensing cycle that followed has been heavy. Dozens of providers have been authorised, with many more applications still in the pipeline. A noticeable number were withdrawn after the FSCA decided the business models and compliance controls were not ready for prime time.

This regime is already shaping retail behaviour. In the trading-bot blow-up that cost South Africans nearly R500 million, one of the biggest red flags was that the platform had zero FSCA authorisation. “Regulated or not” became the first filter, not an optional extra.

South Africa is also lining up the reporting pipes. Draft regulations aim to implement the OECD’s Crypto-Asset Reporting Framework by March 2026. Once in force, licensed crypto providers will have to identify users, collect detailed transaction data, and send it automatically to SARS or foreign tax authorities under information-exchange agreements.

South Africa’s play is straightforward. Treat crypto like any other asset for tax, force platforms into the same licence box as traditional finance, then plug them into a global reporting grid. From the state’s perspective, that is tidy. From a trader’s perspective, it is the end of anonymous side hustles that never touch an ITR12.

Kenya vs SA: tax pain vs platform pain

If you strip away the legal jargon, the Kenya vs South Africa trade-off looks like this:

Kenya’s old regime

• 3% tax on every trade’s gross value, no matter the profit or loss.
• Light regulation of platforms, which kept the door open for dodgy operators.

Kenya’s new regime

• Excise of 10% on platform fees, which is far smaller than 3% of each trade value in most scenarios.
• Formal licensing of VASPs under a dedicated law, tied to physical presence, KYC, and board requirements.

South Africa’s regime

• Normal tax rules for trading and investing, with SARS guidance and clear CGT mechanics.
• FSCA CASP licensing under FAIS, plus a growing enforcement track record.
• CARF-style data reporting coming, which will make offshore hiding spots far less useful.

The Kenyan shift is unambiguously kinder than the old 3% tax for an everyday trader, yet it still relies on local enforcement to keep platforms honest. For South Africans, the regime is heavier on paperwork for platforms and visibility for users, yet it avoids an extra “crypto tax” on top of what you already owe.

The Kenyan model now looks like: lighter tax on trades, tougher rules for platforms. The South African model is: ordinary tax on profits, thick regulation for platforms, and rising transparency expectations for users. The surface ingredients are different, yet both recipes try to land in the same place, where regulators can see the flows and retail traders are not taking all the risk.

What does this mean if you trade from South Africa?

If you are a South African with a Binance tab, a VALR tab, and a Twitter thread about Nairobi hubs, the big questions are practical.

1. Where is your money safer?
South Africa scores well on pure consumer protection. The CASP regime lets you check whether a platform is licensed, what categories it holds, and whether the FSCA has issued any warnings. The regulator has already shown it is willing to name and shame unlicensed operators and push back against weak licence applications.

Kenya’s VASP law is new. The rules on local offices and board representation should make it harder to vanish overnight, yet it will take time before there is a public licensing track record and visible enforcement actions. Right now, that scorecard is still being written.

2. Where is trading cheaper?
On tax, Kenya’s move from 3% DAT to a 10% excise on fees is a huge improvement for active traders. The difference between losing 3% of every trade and a small fraction of the platform fee compounds very quickly.

In South Africa, you do not pay a per-trade crypto tax, yet you do carry income tax and CGT on net outcomes. That can still sting if you have a good year, although at least the bill is based on profits, not turnover.

3. Does using a Kenyan or offshore platform dodge SARS?
No. CARF is specifically designed to stop that game. Once South Africa implements the crypto-asset reporting regime, foreign platforms that fall under the framework will be pushed to report South African tax residents’ activity back to SARS through automatic exchange channels.

If your plan is “trade on a Kenyan-licensed exchange and pretend it never happened”, that window is shrinking.

Geographic arbitrage used to mean hopping to whichever exchange gave you the best leverage or the loosest KYC. In the CARF era, geographic arbitrage is more about where you build and bank your crypto business, not where you hide the trades. Tax offices are starting to swap data like memes.

What this means if you want to build in crypto

For founders and developers, the comparison matters even more.

Licensing and banking

• South Africa’s CASP regime is demanding, yet it gives you a transparent path to a licence number and, importantly, a bank account. Banks have already indicated that operating without FSCA approval is a non-starter for serious platforms.
• Kenya’s VASP law requires local presence, but the tax tweak and hub narrative are likely to attract regional players who want East African exposure without a 3% tax on every swap. Banking and implementation details still need to settle.

Regulatory scope

• South Africa is gradually folding crypto into its broader conduct framework, including the upcoming COFI Bill, which should eventually standardise how all financial products are treated. That can create longer-term stability, even if the short term feels thick with compliance.
• Kenya has opted for a crypto-specific law. That offers dedicated attention but could create friction if rules lag behind new product types like DeFi protocols, stablecoins, or tokenised real-world assets.

Talent and ecosystem

Both countries have strong developer and fintech communities. South Africa has an advantage in deep financial-services experience and listing structures; Kenya scores high on mobile-money literacy and willingness to adopt new payment rails.

If you are dreaming of a pan-African exchange or wallet, South Africa may be the place where institutional investors take your compliance deck seriously, while Kenya may be where early user growth accelerates once the new VASP regime finds its feet. The smart move is to plan for both, not pick one and hope the other never matters.

So, who is getting it right?

From a South African's POV, the uncomfortable answer is that both countries are closer to “sensible” than they were, yet neither is perfect.

• Kenya deserves credit for admitting the 3% digital asset tax was a bad idea and switching to a model that taxes platform economics rather than every trade. That change alone will stop a lot of value from leaking out of local markets.
• South Africa deserves credit for getting serious earlier on consumer protection, putting CASP licences in place, and lining up global reporting standards instead of pretending offshore exchanges do not exist.

If the question is who protects retail users better today, South Africa is ahead, simply because the FSCA regime is more mature and the tax rules are already integrated into existing law.

If the question is who has made the bolder, more growth-friendly pivot in the last year, Kenya takes that prize by scrapping a punishing tax and signalling that it wants platforms to bring business onshore, not push it away.

For South Africans trading or building in crypto, the answer is less about picking a winner and more about reading the direction of travel. Regulation is no longer a future problem. It is the water you swim in, whether you trade from Sandton, Nairobi, or an app server somewhere in between.

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