Mexico has positioned itself as an innovation hub for the blockchain and fintech sectors by having the first fintech law in the world that brings together new innovative financial entities, commonly known as wallets and crowdfunding institutions, in the same regulatory body, thus incorporating the possibility of using fintech components such as virtual assets, open banking and the regulatory sandbox.
The ecosystem has grown by more than 115% just three years after the publication of the Fintech Law. This is due to the existence of a regulatory framework that provides legal certainty to market participants, establishing an adequate balance between innovation and the reduction of legal and systemic risks.
Mexico has seen a growing number of blockchain companies. To date, there are more than 22 different cryptocurrency exchanges, including the largest cryptocurrency exchange in Latin America (Bitso), which is now a Mexican "unicorn" with a valuation of USD2.2 billion and more than two million users, and has already expanded its operations to Argentina and Brazil. This entity already has the first international cryptocurrency licence issued by the Gibraltar Financial Services Commission at a Latin America level and the first licence for a wallet issued by the Mexican fintech regulator.
This has generated a focus on Mexico, attracting the world's largest blockchain companies. The blockchain ecosystem in Mexico has 50 essentially blockchain companies and more than 750 fintech companies across a variety of sectors.
The COVID-19 pandemic and the accompanying confinement and social distancing, while regrettable, have ended the times when C-level executives would merely discuss the possibility of innovating and cleared the way for an accelerated technological adoption, simply to be able to survive in this so-called “new normal”.
The number of players from traditional sectors, both private and public, that are seeing their future survival in technological solutions such as blockchain and fintech is growing exponentially, as such technology positions itself as a light at the end of the tunnel. In 2020 alone, Mexico ranked sixth in the world in cryptocurrency users, and the sector has advanced between two and five years ahead of the growth projected prior to the start of the pandemic.
In Mexico, huge efforts and important reforms must be made at a regulatory level in the following areas in order to provide security and legal certainty:
In this case, we have to consider whether blockchain will ever become mainstream in Mexico. This seems likely, as Fortune 500 companies are already disrupting the aeronautical, automotive, real estate and financial sectors with this technology.
As discussed in 1.1 Evolution of the Blockchain Market, the adoption of innovation and technology has accelerated enormously, in both the private and public sectors.
This innovation has taken the form of different models and blockchain trends in 2021, including the following:
The LACChain alliance is a programme for the development of the blockchain ecosystem in Latin America and the Caribbean, led by the innovation laboratory of the Inter-American Development Bank and integrated by leading blockchain organisations. The blockchain ecosystem being created in Mexico is positioning the Latin America region ahead of any other region in the world in the use of this technology, mainly for the fintech sector.
The adoption of DeFi platforms has been slow in Mexico, and there is no common knowledge among the general public regarding the different DeFi services, nor among the regulators for that matter.
The only access points for Mexican users into DeFi platforms are Binance Dex and Mexo. Mexo is a cryptocurrency exchange that offers more than 21 DeFi tokens, such as Polkadot, Yearn Finance, Uniswap, SushiSwap, Aave, Maker and Compound.
There are no regulatory positions on DeFi, considering that the vast majority of activity in that sector is lending and, in Mexico, lending is not an activity reserved for financial institutions, but it has some transparency and AML/CFT regulations depending on the model.
Furthermore, there are no specific rules or models for decentralised prediction markets or decentralised stablecoins, so they are subject to interpretation.
Mexican users can access decentralised lending platforms, such as Compound, by using the on-ramp mentioned in 1.1 Evolution of the Blockchain Market.
Finally, there are no specific rules applicable to decentralised finance platforms.
However, it is important to analyse whether the transacted asset has the qualities of a security or virtual asset under the Mexican regulatory framework, in which case the securities legal framework will apply, and whether the DeFi model performs an activity that is reserved for financial institutions, such as the collection of resources, insurance services or the transmission of money, among others.
There is already a specific regulatory regime in Mexico that applies to financial participants using blockchain technology or crypto.
The so-called Fintech Law (Law to Regulate Financial Technology Institutions) published in the Mexican Official Federal Gazette on 9 March 2018 (which became effective the following day) was the first law in the world to enact a specific compendium of legal provisions to govern different actors in the blockchain ecosystem.
Mexico's position as the undisputed fintech leader in Latin America has been boosted by the Fintech Law, which has been praised internationally and taken as a reference on how to boost the development of financial technology in the world. Regulators from different latitudes observe the Mexican example, anticipating the result that such an important regulatory body will have.
The Fintech Law concentrates several exciting possibilities of the fintech world in the same regulatory body, including:
Virtual assets in Mexico are defined as “a representation of value electronically recorded and used among the public as a payment method for any kind of legal act and whose transfer can only be carried out through electronic means. In no case shall virtual assets be understood to mean the currency of legal tender on national territory, foreign currency or any other asset denominated in legal tender or in foreign currency” (Article 30 of the Mexican Fintech Law).
There are several standards in the pipeline, and the following have already been published by the International Organization for Standardization (ISO):
In terms of AML/CFT regulations, the guidance for a risk-based approach to virtual assets and virtual asset service providers (VASPs) published by the Financial Action Task Force (FATF) and the discussion papers on designing a prudential treatment for crypto-assets and supervising crypto-assets for anti-money laundering published by the Bank of International Settlements (BIS) has been taken into consideration, and Mexico has enacted and reformed several regulations to comply with these standards, such as the Fintech Law and the Mexican Anti-money Laundering Law (Federal Law for the Prevention and Identification of Operations with Resources of Illegal Proceeds).
The inter-institutional committee formed by the Mexican Central Bank (Banxico), the National Banking and Securities Commission (CNBV) and the Ministry of Finance (SHCP) is the body in charge of approving the incorporation of new fintech entities, notably those involved in wallets and crowdfunding.
Banxico is the authority in Mexico that is responsible for taking the necessary measures to preserve the value of the Mexican peso, to control monetary policy and to promote the healthy deployment of the financial system, including the proper functioning of payment systems and wallets, setting forth the secondary legal framework that applies to such.
The CNBV is responsible for supervising and regulating (within its competence) those institutions that belong to the Mexican financial system, in order to ensure their stability and proper functioning, as well as maintaining and promoting the healthy and balanced development of the financial system as a whole, always while protecting the interests of the public.
The Securities and Savings Banking Unit of the SHCP formulates policies for the promotion, regulation and supervision of financial services, banking, credit, securities, assets and derived assets; for the protection of bank savings, savings and popular credit; and for the protection and defence of financial services consumers.
The Financial Intelligence Unit is a unit of the SHCP that is specifically in charge of identifying, preventing and combatting any kind of operation related to money laundering and the financing of terrorism.
The National Institute of Transparency for Access to Information and Personal Data Protection is Mexico's data protection authority.
The Energy Regulatory Commission and the National Service of Environmental Certification for Sustainable Investments are the main bodies regulating the energy industry in Mexico.
In Mexico there are no self-regulatory organisations or trade groups that perform regulatory or quasi-regulatory roles with regard to blockchain.
There are no judicial decisions that have impacted the blockchain sector in Mexico.
However, in May 2019, the Collegiate Circuit Court on Administrative Matters Specialised in Economic Competition issued a resolution that granted jurisdiction to the Federal Economic Competition Commission (COFECE) to resolve the merger between Uber and Cornershop, establishing a precedent that will affect the virtual asset market in the future.
There are no enforcement actions in Mexico that have helped market participants better understand the “regulatory perimeter” of permitted and prohibited activity using blockchain. However, such actions are expected in the future.
As mentioned in 2.1 Regulatory Overview, the Fintech Law sets forth a regulatory sandbox, meaning the possibility of carrying out activities reserved for financial entities authorised by the Mexican financial regulator, using innovative technological tools or means, or with different modalities from those currently existing in the Mexican market, such as blockchain technology.
In addition, Mexico is part of the Global Financial Innovation Network (GFIN) and has implemented the GFIN cross-border pilot scheme to create an environment that allows firms to simultaneously trial and scale new technologies in multiple jurisdictions, gaining real-time insight into how a product or service might operate in the market, if such firms:
It is of the utmost important to mention that the form which the financial entity intends to take at the end of the sandbox determines which sandbox is applicable and which financial authority will regulate the authorisation.
The tax regime in Mexico has not been updated to consider the use of blockchain or cryptocurrencies; the traditional regulation remains applicable.
An important point to consider is the Digital Platforms Tax that came into operation in June 2020, which applies to individuals who obtain income from providing services or selling goods through digital platforms.
In this tax regime, it is the Digital Platform that makes the income tax and VAT withholdings, and it will be the same platform that pays these withholdings directly to the Tax Administration Service (SAT).
For the calculation of the withholding, the following specific rates are used for each type of income, for income tax purposes:
VAT calculation is more simple, as the digital platform will withhold 8%, which represents 50% of the real VAT rate of 16%.
The Mexican Blockchain Network (MBN) is a multi-sector initiative to provide a public infrastructure so that different participants can deploy public solutions based on blockchain. This initiative seeks to democratise access to blockchain in the country and open a channel to facilitate pilot projects and analyse the potential uses of blockchain technology in relevant areas.
From 14 August to 28 September 2018, a proposal for a governance model for the MBN was made available to citizens, so that interested parties could help define the required policies to establish and consolidate this ecosystem.
The result was a guide to define the beta phase of development, which is divided into two sections:
Moreover, a Legal Working Group was recently created in Mexico under the leadership of the Inter-American Development Bank in the LACChain initiative, through which the regional alliance hopes to achieve several important objectives, such as creating a shared access database of a set of constitutional, legal and regulatory provisions that could have relevance and application when designing and implementing technological solutions based on distributed ledger technology in each country where it has a presence.
In addition, LACChain expects the groups to serve as a legal reference for the entire community inside and outside the countries where it will have a presence.
There is no set of specific rules applicable to the ownership of digital assets. In this context, the general rules of disposal apply, depending on the specific case.
There are no official categorisations in Mexico, other than the Fintech Law's definition of digital assets as a “representation of value electronically recorded and used among the public as a payment method for any kind of legal acts and whose transfer can only be carried out through electronic means.
However, it is important to analyse if the asset has the qualities of a security under the Mexican regulatory framework, in which case that framework will be applicable.
Mexico does not have a specific legal framework for stablecoins.
However, the definition of digital assets sets forth that in no case shall virtual assets be understood to mean the currency of legal tender on national territory, foreign currency or any other asset denominated in legal tender or in foreign currency.
Furthermore, for fintech and bank institutions, such digital assets must meet various characteristics, including the following:
In this context, the legal framework and distinctions made between stablecoins whose value is intended to be pegged to a second asset and those backed by deposits of fiat currency and algorithmic stablecoins that use a formula to maintain their peg are open to interpretation.
When talking about payments with digital assets. it is important to distinguish who makes the payment.
This is relevant as the Fintech Law sets forth that fintech and banking institutions may only operate with digital assets if such assets are not used to directly provide their clients with services of exchange, transmission or custody of virtual assets.
In this context, third parties other than fintech and banking institutions may use digital assets as a payment method, and fintech and banking institutions may use digital assets as payments between themselves and indirectly with the public, as a matter of principle. However, it is important to remember that a regulatory sandbox allows entities to provide regulated financial services and request regulatory exceptions, subject to compliance and the limitations of the legal framework.
This is relevant considering that the Bitcoin price in 2021 surpasses the threshold of USD60,000, so we are witnessing a continuous adoption of cryptocurrencies in Mexico.
Notwithstanding the above, Bitcoin has been suffering huge variations on its price since the end of April, leading Mexican users to discuss which crypto will explode in 2021.
There are no specific regulations applicable to non-fungible tokens.
However, the intellectual property and copyright regulation would be applicable to non-fungible tokens, and it would be important to analyse whether there would be AML/CFT reporting obligations when dealing with art or virtual assets, depending on the nature as determined by the regulator, but this is open to interpretation.
The market is divided into custodial exchanges, non-custodial exchanges and brokers. As far as is known, there is only Binance DEX operating in Mexico by which Mexican users can perform DeFi operations.
In Mexico, fiat currency is exchanged for cryptocurrency or cryptocurrency for fiat through exchanges, liquidity providers and brokers – all of which are subject to the KYC/AML legal framework. Please refer to 4.3 KYC/AML for further discussion thereof.
The regulation for money transmission sets forth the legal regulatory framework for entities that – regularly and in exchange for the payment of a consideration, commission, benefit or profit – receive, in national territory, rights or resources in national currency or foreign currency, by any means, to transfer them abroad or to another place in the national territory.
In this context, it is important to remember that digital assets shall not, in any case, be understood as:
The regulation of money transmission using cryptocurrency denominated in legal tender or in foreign currency is therefore open to interpretation.
When talking about the KYC/AML legal framework applicable to transactions in digital assets, it is important to distinguish it is fintech and banking institutions making those transactions, or other entities.
For fintech and banking institutions there are specific KYC/AML rules for each financial entity; for other entities, the general rules of the Federal Law for the Prevention and Identification of Operations with Resources of Illegal Origin apply.
There are no specific rules applicable to markets for digital assets.
However, it is important to analyse if the asset has the qualities of a security under the Mexican regulatory framework, in which case this framework will be applicable. If so, the main authority will be the CNBV.
In addition, with regard to antitrust matters, Mexico has two antitrust authorities:
The applicable regulation did not clearly establish which authority was competent to resolve cases related to digital platforms. In this context, in May 2019, a resolution was issued that gave the competence to COFECE in resolving the merger between Uber and Cornershop, establishing a historical precedent that will affect the market for digital assets in the future.
There have not yet been any enforcement actions under the Mexican regulatory framework.
There are no specific regulatory limits on the ability of a digital asset exchange to re-hypothecate (on-transfer) to third parties the digital assets they hold for customers; the general transfer rules apply.
There are no specific regulations in Mexico applicable to businesses that provide hot or cold storage solutions for private cryptographic keys that control the ability to give instructions with respect to digital assets.
However, depending on the cryptocurrency that is held, this activity could be considered custody of money by regulators, but this is open to interpretation.
There are no specific rules applicable to fundraising through the creation and sale of tokens.
However, it is important to analyse if the asset has the qualities of a security under the Mexican regulatory framework, in which case the securities legal framework or the crowdfunding legal framework will apply, pursuant to the Fintech Law.
There are no specific rules applicable to fundraising through initial exchange offerings.
However, it is important to analyse if the asset has the qualities of a security under the Mexican regulatory framework, in which case the securities legal framework or the crowdfunding legal framework will apply.
There are no specific rules applicable to investment funds, so the general legal framework for investment funds will apply.
In any discussion of regulation regarding broker-dealers dealing with digital assets, it is important to distinguish whether it is fintech and banking institutions making those transactions, or other entities.
Fintech and banking institutions may be broker-dealers either between themselves or indirectly with the public. However, it is important to remember that the regulatory sandbox allows for the provision of regulated financial services, and also allows requests for regulatory exceptions subject to compliance with, and the limitations of, the legal framework.
For fintech and banking institutions, there are specific KYC/AML rules for each financial entity; for other entities, the general rules of the Federal Law for the Prevention and Identification of Operations with Resources of Illegal Origin apply.
There are no specific laws, regulations or binding judicial decisions addressing the legal enforceability of private contractual arrangements made, in whole or in part, using agreed-upon computer code that executes across multiple “nodes” on a blockchain-based network; therefore, the general legal framework for contracts will apply.
When talking about the responsibility of the developers, it is important to distinguish whether they have a contract, and the terms and conditions thereof.
If they have a contract, the damage or economic loss will depend on the terms and conditions set forth between the parties. If no contract was agreed upon, damages or losses are governed by civil law and the affected party must demonstrate the following:
There are no specific rules applicable to DeFi platforms.
However, it is important to analyse the following:
In particular, there are applications that could fall under the regulation of Collective Financing Institutions, in which case the corresponding legal framework will apply.
In any case, the Law for the Protection and Defence of Users of Financial Services (Ley para la Protección y Defensa al Usuario de Servicios Financieros) and the Law for the Transparency and Ordering of Financial Services (Ley para la Transparencia y Ordenamiento de los Servicios Financieros), which regulate applicable fees, interest rates and conciliation procedures, among others, will apply.
There are no specific rules applicable to the use of digital assets as collateral; the general rules for collateral will apply and it may be possible to register the collateral in the single registry of real estate guarantees.
When talking about the custodians of digital assets, it is important to distinguish whether it is fintech and banking institutions that are making those transactions, or other entities.
Fintech and banking institutions may offer custodial services either between themselves or indirectly to the public, at least in principle. However, it is important to remember that the regulatory sandbox allows for the provision of regulated financial services, and for requests for regulatory exceptions, subject to compliance with, and the limitations of, the legal framework.
For fintech and banking institutions, there are specific rules in the Fintech Law; for other entities, there are no specific provisions so the general rules for custodians will apply.
There are no specific rules applicable to data privacy (including the “right to be forgotten”) in Mexico that apply to the use of blockchain-based products or services; therefore, the general provisions will apply.
In general, the person responsible for collecting the personal data of an individual must make available to the owner of that data a privacy notice that complies with the applicable regulation so that the data owner consents to the collection of his or her data and the specific use that will be given to it.
Data protection law gives the data owner the power to access, rectify, cancel or oppose the treatment of their data. If those rights are not upheld, significant penalties may arise.
A specific legal framework is applicable to financial data.
There are no specific rules applicable to data protection that apply to the use of blockchain-based products or services; the general provisions will apply.
In Mexico, there are two main sources of data protection laws: one is applicable to the private sector while the other is applicable to authorities and state organisations. In general, the person responsible for collecting the personal data of an individual must make available to the owner of that data a privacy notice that complies with the applicable regulation so that the data owner consents to the collection of his or her data and the specific use that will be given to it.
Data protection law gives the data owner the power to access, rectify, cancel or oppose the treatment of their data. If these rights are not upheld, significant penalties may arise.
Any model based on blockchain technology must comply with the general rules on Privacy and Personal Data Protection in Mexico.
However, there may be cases where the Right of Cancellation or Rectification may be limited due to the immutability of the blockchain, but there are different ways in which the proper programming of the network can help to avoid falling into non-compliance with the regulatory framework for the protection of personal data in Mexico.
There are no specific rules applicable to mining.
However, in Mexico, a general principle applies: whatever is not prohibited by law is permitted for non-regulated people or businesses. Therefore, as there are no regulations or prohibitions applicable to mining, it is an allowed activity.
However, mining has an important energy aspect and, depending on the amount of energy required, a mining entity may be considered as a qualified user and therefore subject to the corresponding energy legal framework.
There are no specific rules applicable to staking. However, staking needs to comply with the custodian legal framework.
When considering staking custodians of digital assets, it is important to distinguish whether it is fintech and banking institutions making those transactions, or other entities.
Fintech and banking institutions may be custodians either between themselves or indirectly with the public, in principle. However, it is important to remember that the regulatory sandbox allows for the provision of regulated financial services, and for requests for regulatory exceptions, subject to compliance with, and the limitations of, the legal framework.
For fintech and banking institutions, there are specific rules in the Fintech Law; for other entities, there are no specific provisions, so the general rules for custodians will apply.
The origin of the concept and definition of "blockchain" came from the emergence of Bitcoin in 2008, a couple of weeks after the fall of Lehman Brothers, which led to the global financial crisis of 2007–08.
Blockchain is a distributed database that maintains a continuously growing list of ordered records; the technology is a type of distributed ledger technology (DLT), which is an accounting system where the ledger (record of transactions) is distributed among a network of computers. This network of computers manages the blockchain together, without hierarchy. With such a flat architecture, blockchain networks are often referred to as peer-to-peer networks.
The computers verify all transactions one by one and add them onto a "block" of information. These blocks are then added to the blockchain and downloaded onto each computer. In a nutshell, this is how these computers keep the blockchain secure and running.
According to venture capital company Andreessen Horowitz, we are currently experiencing the fourth wave of innovation. As a result, we may begin to see products and platforms that use decentralised technology with millions of users in the coming years.
It is important to note that blockchain is not a service or a product per se; it is only the tool that lets developers develop products and services. These products and services can be related to finance, healthcare, government or digital ID, among others.
Bitcoin is the first application of blockchain as a trust mechanism that allows the transfer of value between individuals.
The essence of the cryptocurrency boom is that many people see cryptocurrencies solely as a commodity that can be sold at a higher price than the purchase price. Cryptocurrencies can be bought through cryptocurrency exchanges and platforms that purchase and sell cryptocurrency. In addition, a cryptocurrency exchange can be used to trade one crypto for another – converting Bitcoin to Litecoin, for example – or to buy crypto using regular currency, like US dollars or Mexican pesos.
In March 2018, ten years after the publication of the Bitcoin white paper, the Mexican government published the Mexican Fintech Law (Ley para Regular a las Instituciones de Tecnología Financiera), the purpose of which was the financial inclusion and regulation of new financial technologies. The law includes a chapter that defines cryptocurrencies, or activos virtuales (virtual assets), and describes the uses thereof for Mexican financial institutions.
According to the Fintech Law, cryptocurrency exchanges should operate as financial entities. Also, any company or individual that operates with cryptocurrencies should comply with the Fintech Law and its dispositions.
Nevertheless, in March 2019, the Banco de Mexico published standards on Circular 4/2019 that prohibited financial entities from carrying out clients' financial operations with cryptocurrencies. Financial entities can only carry out internal transactions with cryptocurrencies – ie, those activities relating to the passive, active and service operations that they perform for clients or carry out on their own. These standards mean that transactions with cryptocurrencies were not officially recognised as financial transactions.
The Mexican authorities had been unable to agree on the law that would apply to the professional offering of virtual asset exchange by entities other than financial institutions, carried out through electronic, digital or similar platforms that manage, operate, facilitate or carry out purchase or sale operations of clients' assets or provide means to guard, store or transfer virtual assets other than those recognised by Banco de México in terms of the Law to Regulate Financial Technology Institutions.
To date, the government has not published any new law or standards for the use of cryptocurrencies or blockchain. Cryptocurrencies are not illegal in Mexico: companies and individuals are permitted to hold, trade, buy and sell cryptocurrencies.
The COVID-19 pandemic and the ensuing lockdowns across the globe resulted in an ever-increasing number of blockchain uses through the development of non-fungible tokens (NFTs), stablecoins and decentralised finance services and products (DeFi).
Decentralised finance refers to services like investing, borrowing, lending and trading that are based on decentralised, non-custodial infrastructure.
Blockchain and cryptocurrencies initiated the process of democratising the global economy and financial services, but DeFi has promised to comply with genuine democratisation. DeFi has evolved since the 2015 launch of the Ethereum network, which laid the groundwork by implementing blockchain-based smart contracts.
DeFi does not mean that services are unregulated or above the law. Decentralised operations and services are different from centralised transactions because they are not managed by an institution and its employees. Instead, the rules are written in code on the smart contract. Once the smart contract is deployed to the blockchain, decentralised applications (dApps) can run themselves with no human intervention.
DeFi activity spans many domains of financial regulation, including securities, derivatives, exchanges, investment management, bank supervision, financial crime, consumer finance, insurance and risk management. Macro-prudential oversight for that regulation is critical in order to comply with the relevant objectives and associated categories of policy and law. Common goals for financial regulation include the following:
Each provides a distinctive logic for certain kinds of rules. For example, regulators focused on investor protection are typically concerned that custodians cannot abscond with funds. The noncustodial nature of DeFi may alleviate some of these worries, albeit while creating new ones.
DeFi is based mainly on lending. DeFi users deposit their stablecoins or other cryptocurrencies as collateral; they get an interest rate, among many more services, in exchange for the collateral they have deposited.
At the time of writing, there is more than USD59 billion collateral on the Ethereum network. These dollars are represented in more than one stable currency or cryptocurrencies used in loan platforms such as AAVE, liquidity providers such as Uniswap, and even investment optimisation platforms such as Yearn Finance.
The use of cryptocurrencies beyond speculation has brought a universe of financial possibilities; the most significant impact is the immense profits and the high risk.
Mexican start-ups are working on developing DeFi products and services for a country that is the biggest consumer of decentralised financial services and products in Latin America.
As mentioned above, the Mexican government is not currently working on addressing the regulation of DeFi services, but international organisations such as the World Economic Forum are producing white papers to lay the foundations for countries to regulate DeFi.
A non-fungible token is a tradable digital ownership certificate representing the ownership of a unique asset. Non-fungible refers to those assets that are not easy to exchange or mix with other similar goods or assets, such as art. Therefore, NFTs are digital content linked to the blockchain – ie, the digital database underpinning cryptocurrencies such as Bitcoin and Ethereum.
NFTs let the users transfer assets (tokens) and share patents, trade marks, royalties and property rights using the benefits of blockchain technology.
NFTs differ from cryptocurrency in that there are many bitcoins, and they are all interchangeable, whereas NFTs each have a unique identifying code on the blockchain – ie, NFTs are not interchangeable.
NFTs can solve some of the problems that exist on the internet today. As everything becomes more digital, there is a need to replicate the properties of physical items, like scarcity, uniqueness and proof of ownership, not to mention that digital items often only work in the context of their product. Some NFTs will automatically pay out royalties to their creators when they are sold. This is still a developing concept, but it is one of the most powerful.
Non-fungible assets are regulated in the Mexican civil code. Tokenisation has no regulation, but the interesting related aspect of legal practice is how NFTs comply with the Copyright Law and how the owner of the token and its rights are protected by the law. Also, it is essential to mention that, even though smart contracts and the blockchain register the transactions, the royalties and the rights must be exercised by the owner in the jurisdiction that applies, in compliance with the principles of the Private International Law, or with the obligations established in the smart contract.
The Mexican Copyright Law protects authors' patrimonial or economic rights. Moral rights are inherent, indefeasible, non-waivable and non-sizable, and grant the author the following rights, among others:
It is essential to mention that it is a crime under the Mexican Criminal Code to illegally copy an NFT.
In Mexico, blockchain technology is not regulated; individuals and companies are available to develop any service or product with blockchain. Since the publication of the Bitcoin white paper in 2008, blockchain has transformed how we make transactions with different assets, such as the tokenisation of non-fungible assets.
During the last two years, blockchain uses have had an impact on society as a whole, and not just experts or fanatics. This is why the legal practice must develop hand in hand with the technology, providing users with strategies to comply with the local and international laws and developing the private rules between users to prevent and avoid conflicts.