- Madras High Court rules cryptocurrency is property under Indian law, giving investors legal ownership rights.
- XRP holdings declared separate from hacked Ethereum assets, protecting investor funds in the WazirX case.
- The court directed crypto firms to keep client funds separate and follow strong audit and KYC standards.
The Madras court has decided that cryptocurrencies, such as XRP, are considered property in India. The judgment was passed by Justice N. Anand Venkatesh, which is a significant legal advancement in the Indian digital economy. According to the Court, cryptocurrencies could be possessed, transferred, and kept in trust, just like other movable assets.
The case was caused by a conflict concerning the WazirX exchange, which is run by Zanmai Labs Pvt. Ltd. In January 2024, an investor bought 3,532.30 XRP coins at 1,98,516 INR. In July, several months later, the site was attacked, resulting in the loss of 230 million Ethereum and ERC-20 tokens. After the breach, WazirX had to freeze a number of user accounts, including that of the investor. In November, WazirX launched DEX to boost user security after a $235M hack, addressing centralized exchange concerns.
Legal Dispute and Jurisdiction
The investor claimed her XRP holdings were distinct from the stolen Ethereum-based assets. She argued that the exchange held her tokens in trust and sought legal protection under Section 9 of the Arbitration and Conciliation Act, 1996. Zanmai Labs opposed the claim, stating that its Singapore-based parent company, Zettai Pte Ltd, was under a foreign court order requiring shared losses among users.
Justice Venkatesh dismissed this argument. He held that Indian courts have jurisdiction since the investor’s transactions originated from Chennai using an Indian bank account. The Court referred to the Supreme Court’s ruling in PASL Wind Solutions Pvt Ltd v. GE Power Conversion India Pvt Ltd (2021) to confirm that Indian courts can protect assets located within India, even when arbitration occurs abroad.
Court’s Interpretation of Cryptocurrency
The judge highlighted that cryptocurrencies possess the characteristics of property. They are identifiable, transferable, and manageable through private keys. He mentioned the provision of the Income Tax Act of 1961, Section 2(47A), which defines cryptocurrencies as virtual digital assets. The Court found that the XRP holdings were not managed by the WazirX cyberattack since Ethereum-based tokens were the only ones affected.
According to Justice Venkatesh, digital assets in India can never be classified as speculative tools anymore. Instead, they represent a legitimate form of property with quantifiable ownership rights. The ruling clarifies that cryptocurrencies are capable of being held, enjoyed, and transferred like other recognized assets.
Implications for Crypto Governance
The Court also addressed corporate governance in the crypto sector. Justice Venkatesh observed that transactions should have distinct client accounts and auditing on its own. He furthered that strong KYC and anti-money-laundering practices are necessary in the industry to hold them accountable.
The ruling distinguishes between Indian and foreign entities in crypto operations. Zanmai Labs, registered with India’s Financial Intelligence Unit, was recognized as the authorized operator, unlike its Singapore parent firm. The judgment sets a precedent for digital asset recognition in India’s legal framework and strengthens investor protection in the virtual asset market.
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