The Madras High Court on Saturday declared that cryptocurrency qualifies as ‘property’ under Indian law, marking a pivotal moment for India’s digital asset ecosystem.
Justice N Anand Venkatesh stated that while cryptocurrencies are neither physical assets nor legal tender, they possess the essential characteristics of property and can be owned, enjoyed, or held in trust, reported The Financial Express.
“There can be no doubt that ‘crypto currency’ is a property. It is not a tangible property nor is it a currency. However, it is a property, which is capable of being enjoyed and possessed (in a beneficial form). It is capable of being held in trust,” the Court observed.
Cyberattack Sparks Legal Debate
The case stemmed from a cyberattack on the WazirX exchange, operated by Zanmai Labs Pvt Ltd. An investor had purchased 3,532.30 XRP coins worth Rs 1,98,516 in January 2024. However, in July the same year, WazirX announced a breach of one of its cold wallets, leading to a massive loss of around $230 million in Ethereum and ERC-20 tokens. Following the hack, all user accounts were frozen, including that of the investor.
The investor contended that her XRP holdings were separate from the stolen Ethereum tokens and held by WazirX in trust. She sought legal protection under Section 9 of the Arbitration and Conciliation Act, 1996, requesting that the company not redistribute her coins. In response, Zanmai Labs and its directors argued that their Singapore-based parent company, Zettai Pte Ltd, was undergoing restructuring under a Singapore court order, which mandated loss-sharing among all users.
Court’s Ruling: Crypto is Identifiable Property
Justice Venkatesh rejected the exchange’s defence, clarifying that the investor’s XRP holdings were unrelated to the hacked assets. “What were held by the applicant as crypto currencies were 3532.30 XRP coins. What were subjected to cyber attack on 18.7.2024 in the WazirX platform were ERC 20 coins, which are completely different crypto currencies not held by the applicant,” he noted.
The judge further elaborated that cryptocurrencies are distinct, transferable, and exclusively controlled through private keys, attributes that establish them as a form of property. Referring to Section 2(47A) of the Income Tax Act, 1961, he underlined that cryptocurrencies are recognised as “virtual digital assets” and not speculative instruments. “In Indian law regime, the crypto currency is treated as a virtual digital asset and it is not treated as a speculative transaction,” the Court said.
Jurisdiction and Regulatory Implications
The Court dismissed the argument that the dispute should be heard in Singapore due to the arbitration clause. Drawing upon the Supreme Court’s precedent in PASL Wind Solutions Pvt Ltd v. GE Power Conversion India Pvt Ltd (2021), Justice Venkatesh ruled that Indian courts can safeguard assets located within India. Since the investor’s transactions were executed from Chennai using an Indian bank account, the case partially fell within the Madras High Court’s jurisdiction.
Additionally, the Court highlighted the regulatory distinction between Indian and foreign entities. Zanmai Labs, it noted, is registered with India’s Financial Intelligence Unit (FIU) and authorised to operate in the domestic crypto market, whereas Zettai Pte Ltd and Binance are not. “In the present case, it is the first respondent, which got registered as a reporting entity and is, therefore, authorised to handle crypto currency in India. Neither the Zettai nor Binance is registered as a reporting entity in India,” the judge remarked.
Broader Impact: Strengthening Trust in Web3
Justice Venkatesh emphasised that Web3 and cryptocurrency platforms must adhere to robust corporate governance principles, including maintaining separate client funds, conducting independent audits, and enforcing strong KYC and anti-money laundering protocols. He noted that the judiciary now plays a vital role in defining digital ownership and accountability in India’s evolving financial ecosystem.
The ruling is expected to bolster investor confidence and provide legal clarity in an industry long plagued by regulatory uncertainty.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.
