Crypto–assets or virtual assets have been the subject of analysis in multiple jurisdictions over the last few years, including in Mexico. Discussions on crypto-assets or virtual assets and their environment have involved the entire Fintech community in Mexico including, in particular, regulators.

In March 2014, the Mexican Central Bank (Banco de México) published its first statement warning about the use of virtual assets, and pointed out that such assets consisted of electronic information storage and exchange mechanisms without the backing of any institution, and therefore could not be considered legal tender. Such statement also indicated that the current legal framework did not recognize it as an official means of exchange or as a deposit of value or other forms of investment, and emphasized that Banco de México did not regulate or supervise them.

In 2017, a second statement was published in which certain Mexican financial authorities warned of the risks associated with the use of virtual assets and participation in investment schemes known as Initial Coin Offerings ("ICOs"). They pointed out that some ICOs that originated and were issued in Mexico could violate Securities Market Law and constitute a financial crime.

It was not until March 2018 that the Law to Regulate Financial Technology Institutions (the “Fintech Law”) was published in the Mexican Official Gazette, which, among other things, established the general framework of the financial technology institutions and established, for the first time, parallel to other financial laws, what should be understood as “virtual assets”.

For the purposes of said Fintech Law, "virtual asset" should be understood as the representation of value registered electronically and used by the public as a means of payment for all types of legal acts and whose transfer can only be carried out through electronic means; provided, however, that in no case shall "virtual asset" be understood as legal tender in national territory, foreign currency or any other asset denominated in legal tender or foreign currency. The same Fintech Law established that Financial Technology Institutions (i) could only operate with the virtual assets determined by Banco de México through general provisions, and (ii) must have prior authorization from the Mexican Central Bank to operate with such assets.

Following the provisions of the Fintech Law, on March 8, 2019, Banco de México published the Circular 4/2019, also known as the "General Provisions Applicable to Credit Institutions and Financial Technology Institutions in Transactions Performed with Virtual Assets". In such provisions, limits were established for Credit Institutions (i.e., banks) and Financial Technology Institutions (i.e., Electronic Payment Fund Institutions and Crowdfunding Institutions) regarding operation with virtual assets. In particular, it was stated that such financial institutions may only enter into transactions with virtual assets that correspond to internal transactions (and only with the authorization of the Mexican Central Bank); in other words, in such secondary provisions, it was defined that the aforementioned financial institutions may not operate virtual assets with their clients.

In June 2019, the Financial System Stability Council published a new statement in which they reiterated certain regulatory points. In such statement, the convenience of maintaining a healthy distance between the regulated financial sector and virtual assets was highlighted, given the risks that the operation with these assets could imply for users, the institutions that operate with them, and the financial system in general; also pointing out that it is in the interest of the financial authorities to allow the use of innovative technologies that could generate a benefit from the perspective of efficiency or functionality.

Finally, the last statement from the Mexican authorities related to virtual assets was published in June 2021, and in such statement, regulators warned about the risk of using virtual assets. The statement, among other things, warned that the country's financial institutions are not authorized to carry out and offer public operations with virtual assets (such as Bitcoin, Ether, XRP, and others) in order to maintain a healthy distance between those institutions and the financial system. It also states that financial institutions that issue or offer such instruments will be liable for such violations of the regulations and will be subject to the applicable sanctions.

A relevant point in such statement that had not been commented on in previous official communications is the one related to "stablecoins". It is pointed out that a stablecoin is a digital unit of value that is associated with the value of a fiat currency (such as the dollar, the euro, or the peso). The issuance of such collection rights against the issuer is not different from the deposit activity, which is restricted to regulated financial entities in the country.

The discussion on the use of virtual assets involves different participants in the Fintech ecosystem, as well as the analysis of different provisions of the Mexican legal framework. Although this note mentions certain restrictions for financial institutions, it is important to mention that to date there are no prohibitions for other entities (other than financial institutions) to operate with virtual assets. However, such entities will have to comply with federal legislation and secondary regulations related to the prevention of money laundering and, most likely, with other legal provisions depending on the products and services offered by such entities.

Sánchez Devanny has specialists in Fintech matters who have advised several Fintech entities on corporate, regulatory, and financial matters.

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José Berrueta-Ochoa | Partner

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Joaquín García-Pimentel | Law Clerk

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