Cryptocurrency is property under Indian law, rules Madras High Court
What's the story
The Madras High Court has ruled that cryptocurrency is a form of property under Indian law. The ruling was made by Justice N Anand Venkatesh, who said that despite not being tangible or legal currency, cryptocurrencies have all the essential characteristics of property. This means people can own and even hold cryptocurrencies in trust.
Legal perspective
'Not tangible property nor is it a currency'
The court clarified, "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)." The ruling came in the wake of a cyberattack on the WazirX exchange operated by Zanmai Labs Pvt Ltd.
Case details
Investor bought XRP coins worth ₹1.98 lakh
An investor had purchased 3,532.30 XRP coins worth ₹1,98,516 in January 2023. However, after WazirX's cold wallet was hacked in July and lost about $230 million in Ethereum and ERC-20 tokens, all user accounts were frozen, including the investor's. The investor contended that her XRP coins were different from the stolen Ethereum tokens and were held in trust by WazirX.
Ruling details
Cryptocurrencies are identifiable, transferable: Justice Venkatesh
Justice Venkatesh rejected Zanmai Labs's argument that the applicant's XRP coins were part of the hack. He clarified that cryptocurrencies are identifiable, transferable, and controlled exclusively through private keys, making them a kind of property. The court also cited Section 2(47A) of the Income Tax Act, 1961, which recognizes cryptocurrencies as "virtual digital assets."
Jurisdictional authority
Indian courts can protect assets located in India
The court dismissed the claim of lack of jurisdiction as the arbitration was seated in Singapore. Citing a Supreme Court ruling, Justice Venkatesh said Indian courts can protect assets located in India. He noted that Zanmai Labs is registered with India's Financial Intelligence Unit (FIU) and is authorized to handle cryptocurrency in India, unlike its parent company, Zettai Pte Ltd, or Binance.
Governance standards
Web3, crypto platforms must follow corporate governance standards
Justice Venkatesh opined that Web3 and crypto platforms should follow the same corporate governance standards as other businesses. This includes separate client funds, independent audits, and strong KYC and anti-money laundering checks. He concluded that courts now play a key role in defining rights, responsibilities, and trust in the digital economy.