What are NFTs and how are they protected in Mexico?

A few months ago, the concept of cryptoart or non-fungible tokens (NFTs) was not widely known. Recent news related to the sale of digital art reaching millions of dollars (eg, $63 million for ‘Everydays – The First 5,000 Days’ by artist Beeple) has made the financial and art worlds take formal notice. Far from being pigeonholed as a novelty act, NFTs have the potential to become not only a new institutional art format but a revolutionary currency for worldwide transactions.

What is an NFT?

An NFT is a token that cannot be substituted for another token of the same type, quality or quantity. This is not limited to artworks; an NFT can be used for any kind of digital object (eg, GIFs, memes, tweets, articles, drawings, music or videos), resulting in a limitless market. NFTs are created using blockchain technology, which acts like an incorruptible log that guarantees that the digital object in question is original and unique – much like a digital certificate of authenticity. Although an NFT cannot be exchanged for another NFT due to the difference in value, it can be sold for a certain cryptocurrency amount. These transactions are then registered in the corresponding blockchain.

It is important to point out that the NFT is not the artwork per se. It is the digital information contained in a blockchain that grants access to the object or artwork.

Legal framework in Mexico

In Mexico, virtual assets such as NFTs and other cryptocurrencies are regulated by the Law for the Regulation of Institutions of Financial Technology, otherwise known as the Fintech Law.

All ‘artistic works’ are regulated by the Federal Copyright Law as “those that are susceptible of being divulged or reproduced in any form or means”. In addition, the law defines ‘copyright’ as “the acknowledgement of the State in favor of the author of artistic or literary works… by virtue of which it grants its protection in order for the author to benefit from personal and patrimonial exclusive prerogatives and privileges”. This protection is granted from the moment that the author creates the artwork (affixed onto a material support). All artwork behind an NFT, as well as its authors, will have the rights and limitations currently established under the Federal Copyright Law, its regulations and secondary laws.

Under the Federal Copyright Law, authors have moral and patrimonial or economic rights. Moral rights are inherent, indefeasible, non-waivable and non-seizable, and grant the author the right to:

• decide whether the artwork is to be divulged;
• the corresponding credit;
• demand respect of the work;
• modify the work; and
• retire the work from commerce, among other rights.

Patrimonial or economic rights grant the author the authority to exploit the work commercially, to obtain a profit therefrom and to transfer these rights to third parties.

The protection span of patrimonial rights in Mexico is that of the life of the author plus 100 years or 100 years after the work has been published.