Tax Panorama of Virtual Assets in Mexico

For the past 10 years, virtual assets have positioned in the spotlight of investors, regulatory agencies, and media outlets. This makes sense considering that the ecosystem of these assets is wide, highly dynamic, and very disruptive.

As of the time of writing, the market-cap of virtual assets surpasses $1.02 trillion dollars; there are more than 9,000 different cryptocurrencies in circulation and over 2,700 NTF (non-fungible token) collections registered¹.

In a second level, the market for cryptocurrencies is so diverse that it can be divided in payment tokens, financial tokens, and utility tokens². On their side, NFTs can be categorized in digital art, domains, virtual real estate, and many others. Moreover, there is even an alternative financial system called Decentralized Finance (DeFi) which operates on virtual assets with the purpose of providing automatized financial services without the need of intermediaries. The estimated market-cap of DeFi surpasses $50 billion dollars³.

These are just a few introductory facts that reflect the strong relevance and seriousness surrounding virtual assets, key elements of the digital economy.

Notwithstanding, even when virtual assets have consolidated as a reality among society, there are still broad questions regarding their nature, utility and, specially, how should regulation be constructed.

The proliferation of these assets has represented a huge challenge for authorities due to the lack of centralized control, their heterogeneous nature, and the fast and constant evolution of the underlying technology on which they operate. Clearly, designing rigid regulation for a live matter is no minor task.

One of the areas that has been challenged the most is tax; to this date it has been impossible to deploy a uniform reaction to questions regarding the fiscal nature of virtual assets and how transactions with these should be taxed.

Efforts have been constant. For instance, in 2020, the Center for Tax Policy and Administration of the Organization for Economic Co-operation and Development (OECD) published a report on the general panorama of the tax treatment that various jurisdictions currently apply to virtual assets⁴. As well, in October 2022, the Committee on Fiscal Affairs of the same organization issued a framework on the reporting standard for these assets⁵.

Even when these actions represent relevant ongoing progress and can serve as a guide, the construction of an adequate tax regime is still pending and there are multiple windows of opportunity that deserve attention and a practical-theorical analysis.

Benefiting from this context, the purpose of this article is to share some considerations on the fiscal treatment that virtual assets have within the Mexican tax legal framework. Nevertheless, it must be disclaimed, from this point onwards, that the spirit of the following lines is not to develop a rigid technical study on the applicable tax regulation, but rather to foster questions in the reader with hopes of producing critical reflections on how the regulation of these assets could be approached.

For this, the analysis will part from a brief explanation on what are virtual assets and how they operate. With that basis set, we will proceed to study the legal nature and applicable tax regime in Mexico. Finally, we will address -in a contrasting manner- some relevant aspects of comparative law that will allow to visualize specific approaches that different countries have adopted.

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¹ https://coinmarketcap.com/, accessed on January 25, 2023.
² Technically, payment tokens are designed to function as any traditional currency; its purpose is to serve as a payment method to acquire goods and services, as well as to be used as a value measurement tool; Bitcoin is the most popular example. Financial tokens are linked to traditional financial assets and its purpose is to serve as investment instruments. Utility tokens serve as means of exchange to acquire or have access to specific goods or services (i.e., Basic Attention Token is used by Brave web browser to financially reward its users for their search history information).
³ https://coinmarketcap.com/es/view/defi/, accessed on January 25, 2023.
⁴ OECD (2020), Taxing Virtual Currencies: An Overview of Tax Treatments and Emerging Tax Policy Issues, OECD, Paris (“OECD – Taxing Virtual Currencies”): The report sets forth a general analysis on the approaches and contrasts of fiscal treatments applied by more than 50 jurisdictions. Also, it provides multiple considerations on tax policy issues.
⁵ OECD (2022), Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard, OECD, Paris: This document approaches the challenges that tax authorities face regarding visibility on operations with virtual assets, given that most transactions can be executed without interacting with traditional financial intermediaries; on this issue, it proposes a regulatory framework to standardize the exchange of information between authorities and presents amendments to the Common Reporting Standard first published in 2014.