Crypto recognized as property in landmark Indian court ruling

The Madras High Court has ruled that cryptocurrencies can be considered as property under Indian law. The ruling was made by Justice N Anand Venkatesh, who said that although digital assets are not physical objects or legal currency, they still have all the main features of property.

Justice Venkatesh noted that digital assets are identifiable, transferable, and controlled exclusively through private keys, with these features making them satisfy conditions to be identified as property. In his statement, the judge claimed that there is no doubt about crypto being a property, highlighting that it is not a tangible asset and neither is it a currency. However, he highlighted that it is a property that can be possessed, enjoyed, and capable of being held in a trust

Indian High Court rules crypto is property

The need for clarity came after a cyberattack on crypto exchange platform WazirX, run by Zanmai Labs Pvt Ltd. An investor had bought about 3,532 XRP tokens worth Rs. 198,516 (approximately $2,260) on the platform in January 2024. Later that year, the platform revealed that its cold wallets had been hacked, leading to a loss of more than $230 million in Ethereum and other ERC-20 tokens. After the hack, all functions were disabled, and user accounts, including the investor’s, were frozen.

Now, the investor is seeking legal protection, arguing that her XRP tokens were different from the Ethereum tokens that were stolen after being held in trust by WazirX. She asked the court for protection under Section 9 of the Arbitration and Conciliation Act, 1996, so that the crypto exchange would not redistribute her holdings. Meanwhile, Zanmai and its directors have opposed this, noting that the company is carrying out the exercise under a Singaporean court order that required all users to share losses.

Zanmai Labs’ argument was rejected by Justice Venkatesh, who argued that the applicant’s XRP coins were not part of the hack, which the company had claimed only affected Ethereum-based tokens. “What were held by the applicant as cryptocurrencies were 3532.30 XRP coins. What were subjected to a cyber attack on 18.7.2024 in the WazirX platform were ERC 20 coins, which are completely different cryptocurrencies not held by the applicant,” the Court said.

Justice Venkatesh claims jurisdiction applies

In his ruling, Justice Venkatesh mentioned that aside from being identifiable and transferable, digital assets can be controlled through private keys. He also mentioned Section 2 (47A) of the Income Tax Act of 1961, which recognizes cryptocurrencies as virtual digital assets. “In Indian law regime, the cryptocurrency is treated as a virtual digital asset, and it is not treated as a speculative transaction,” he added.

In addition, the court also dismissed claims that it had no jurisdiction in the case because the arbitration was done in Singapore. It pointed to a legal precedent, noting the Supreme Court’s decision in PASL Wind Solutions Pvt Ltd v. GE Power Conversion India Pvt Ltd (2021), which means that Indian courts have the right to protect assets located in India. The High Court claimed that the transactions were made in Chennai and the investor in this case used an Indian bank account, making the case fall under its jurisdiction.

Justice Venkatesh also noted that Zanmai Labs is registered with the Financial Intelligence Unit (FIU) in India and is allowed to handle digital assets in India. He highlighted that in this case, the exchange, who registered as a reporting entity in the country, is authorized to handle crypto transactions. “Neither the Zettai nor Binance is registered as a reporting entity in India,” he said. He added that crypto exchanges need to follow the same corporate governance standards as other businesses.

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