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Mexican law defines virtual assets as representations of value electronically registered and utilized by the public as a means of payment for all types of legal transactions, which may only be transferred electronically. Virtual assets may not, under any circumstance, be considered Mexico’s legal currency. Financial companies that carry out transactions with virtual assets must disclose to their clients the risks applicable to these assets. Financial technology institutions are prohibited from selling, ceding, transferring, loaning, using as collateral, or otherwise affecting the use or enjoyment of virtual assets under their custody and control without a pertinent order from the respective client. Services involving virtual assets is an activity classified as vulnerable to money laundering. Thus, providers of such services must report to the Mexican government relevant transactions that reach or exceed a specific threshold.

I. Approach to Assets Created Through Blockchain

Mexico’s Law to Regulate Financial Technology Institutions (Fintech Law) includes a chapter on operations with “virtual assets.”[1]  This chapter defines virtual assets as representations of value electronically registered and utilized by the public as a means of payment for all types of legal transactions, which may only be transferred electronically.[2]  It also provides that virtual assets may not, under any circumstance, be considered to be Mexico’s legal currency.[3]  

A. Financial Regulation

Mexico’s central bank, Banco de México (Banxico), has broad powers under the Fintech Law to regulate virtual assets, including

• specifying virtual assets that financial companies are allowed to operate with in the country, defining their particular characteristics, and establishing the conditions and restrictions applicable to transactions with such assets;
• authorizing financial companies to perform transactions with virtual assets; and
• imposing fines due to unauthorized transactions using virtual assets.[4]

B. Consumer Protection

Financial companies that carry out transactions with virtual assets must disclose to their clients the risks applicable to these assets.[5]  At a minimum, these companies must inform their clients, in a clear and accessible manner on their respective websites or through the means that they utilize to provide services, that

• a virtual asset is not a legal currency and is not backed by the federal government or Mexico’s central bank; 
• once executed, transactions with virtual assets may be irreversible;
• the value of virtual assets is volatile; and
• technological, cybernetic, and fraud risks are inherent in virtual assets.[6]

C. Anti-Money Laundering Law

Providing services involving virtual assets is an activity classified as vulnerable to money laundering.[7]  Thus, providers of such services must report to the Mexican government relevant transactions that reach or exceed a particular amount (equivalent to approximately US$2,849 as of March 2019).[8]  Furthermore, providers of such services have a number of pertinent duties, including

• identifying their clients and verifying their identity through official identification documents, a copy of which must be kept by the provider;
• asking the client for information on his/her occupation if a business relationship is established; and
• keeping records pertaining to transactions and clients.[9]

D. Taxation

The chapter of the Fintech Law that governs virtual assets does not include rules on the taxation of these assets.[10] Pertinent rules as provided by other relevant statutes could not be located. Legal experts have pointed out that the Mexican government has not yet enacted taxation rules for virtual assets.[11]

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II. Custodianship of Cryptocurrencies by Financial Institutions

The chapter of the Fintech Law that governs virtual assets defines “custody and control” of such assets as the possession of signatures, passwords, or authorizations necessary to execute transactions with them.[12] This chapter does not appear to include a rule indicating a specific type of cryptocurrency subject to custody by financial technology institutions.[13] Notably, these entities are prohibited from selling, ceding, transferring, loaning, using as collateral, or otherwise affecting the use or enjoyment of virtual assets that they have under their custody and control without a pertinent order from a respective client.[14]

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III. Regulations of Cryptocurrencies as Financial Securities

The chapter of the Fintech Law that governs operations with virtual assets does not include a rule subjecting specific types of cryptocurrency to the national regulatory regime for financial securities.[15]

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IV. Treatment of Cryptoassets Not Considered Securities

As noted above, Mexico’s Fintech Law provides that virtual assets  are representations of value electronically registered and utilized by the public as a means of payment for all types of legal transactions, which may only be transferred electronically and may not, under any circumstance, be considered to be Mexico’s legal currency.  (See discussion, Part I, above.)

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V. Distinctions in Treatment of Different Categories of Cryptocurrencies

The Fintech Law does not appear to distinguish between different categories of cryptocurrencies.[16] In March 2019, Banxico issued a regulation providing guidelines on virtual assets, including requirements applicable to relevant operations and authorizations to perform transactions with such assets.[17] This regulation does not include rules on specific types of cryptocurrencies.[18] Instead, it provides rules applicable to virtual assets in general.[19]

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Prepared by Gustavo Guerra
Senior Foreign Law Specialist
April 2019

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Last Updated: 12/30/2020