'Cryptocurrency A Property Under Indian Law': Madras HC Unfolds New Era For Digital Assets
The Madras High Court's rulling was for a petition filed by an investor whose XRP holdings on the WazirX platform were frozen after a 2024 cyberattack, Bar and Bench reported.
The Madras High Court has recognised Cryptocurrency as a property under Indian law. Justice N Anand Venkatesh said that Cryptocurrency is a property because it can be enjoyed and possessed in a beneficial form and held in trust.
Justice Venkatesh utilised a large part of the 54-page judgment to analyse how cryptocurrency fits within established notions of legal property, Bar and Bench said.
Justice Venkatesh referred to Ahmed GH Ariff v. CWT and Jilubhai Nanbhai Khachar v. State of Gujarat cases to note that 'property'under Indian jurisprudence encompasses 'every species of valuable right and interest'.
Although digital tokens consist merely of data on a blockchain, they are definable, and can be identifiable, transferable and capable of exclusive control through private keys. These qualities enough to confer a proprietary character, the Madras High Court observed.
The Madras High Court also relied on international precedents including New Zealand High Court's decision in Ruscoe v. Cryptopia Ltd (in liquidation) and the UK High Court ruling in AA v. Persons Unknown. In both cases concluded that Cryptocurrency is a form of property that can be held on trust, Bar and Bench reported.
The Madras High Court's rulling was for a petition filed by an investor whose XRP holdings on the WazirX platform were frozen after a 2024 cyberattack, Bar and Bench reported.
The applicant invested Rs 1,98,516 lakh in January 2024 on WazirX exchange platform and purchased 3,532.30 XRP coins. A portfolio account was allotted to her and registered with her mobile number and email address, according to Bar and Bench. Zanmai Labs Pvt. Ltd. runs the WazirX platform.
On July 18, 2024, WazirX informed on its website that one of its cold wallets had been compromised in a cyberattack, resulting in the loss of Ethereum and Ethereum-based tokens (ERC-20). After this, all accounts on WazirX were frozen, including the applicant's.
WazirX had suffered losses of approximately $230 million because of the attack.
"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,”Justice N Anand Venkatesh
The applicant contended her assets differed from the stolen Ethereum tokens. WazirX held her assets as a custodian in trust. She sought an injunction under section 9 of the Arbitration and Conciliation Act 1996 to prevent the company from redistributing or reallocating her portfolio, Bar and Bench said.
Zanmai Labs and its directors, including Nischal Shetty, opposed the plea. The company stated its parent company, Zettai Pte Ltd., based out of Singapore, had started a restructuring proceedings after the cyberattack. The Singapore High Court approved a scheme of arrangement and required all users to share losses on a pro-rata basis, according to information on Bar and Bench.
The parent firm maintained the Crypto wallets while Zenmai Labs barely handled the Indian rupee leg of transactions, the respondent argued. Hence, the proceedings in the Singapore High Court will decide how the assets will be distributed.
