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. Edul Patel, CEO of Mudrex, said the Madras High Court’s recognition of crypto as property represents a crucial shift for the Indian crypto ecosystem. ‘The Madras High Court’s recognition of crypto as ‘property’ is a major step toward investor protection, granting clear ownership rights and legal recourse against fraud, misuse, or exchange failures. It also redefines exchanges as custodians, demanding stronger governance and transparency. Importantly, the ruling gives Indian courts jurisdiction even when exchanges operate abroad, ensuring accountability,’ he said.
However, Patel cautioned that a one-size-fits-all approach could pose challenges. ‘Treating all crypto tokens as property could create problems since different tokens serve different purposes. For example, governance tokens like UNI from Uniswap are used to vote on decisions within a decentralised protocol, not for profit. If such tokens were taxed or regulated as property, every on-chain vote could be seen as a taxable transaction, which would be impractical, as no money is actually being made,’ he explained.
Summing up, he added, *’Overall, this judgment marks a win for investor safety. India now needs balanced regulations that protect users while leaving room for innovation, recognising crypto as a technology shaping the future of finance.’