A Madras High Court judge has ruled that cryptocurrency qualifies as property under Indian law, barring WazirX from reallocating a customer's XRP holdings. The decision came in a case involving customer Rhutikumari after a hack affected the exchange. This precedent may influence how crypto exchanges handle user assets during insolvency.
On October 25, Justice N Anand Venkatesh of the Madras High Court issued an interim injunction preventing WazirX from redistributing, apportioning, or reallocating 3,532.30 XRP coins owned by Rhutikumari. The customer had purchased the assets by transferring funds from her Chennai bank account. The ruling affirmed that cryptocurrency is treated as a virtual digital asset under Section 2(47A) of the Income Tax Act and is not considered a speculative transaction.
Justice Venkatesh stated: “Cryptocurrency is treated as a virtual digital asset, and it is not treated as a speculative transaction.” The court found that such assets are capable of being enjoyed and possessed in a beneficial form and can be held in trust, establishing them as distinct property rights rather than unsecured claims.
WazirX, operated by an entity under Singapore High Court-supervised restructuring following a hack that halted withdrawals, argued that the platform does not own crypto wallets. The exchange proposed pro rata compensation for users through a three-step process overseen by the Singapore court and claimed the Madras High Court lacked jurisdiction due to the arbitration being seated in Singapore.
The Indian court rejected this, noting that Rhutikumari transferred funds from India and accessed the platform from within the country, establishing jurisdiction as part of the cause of action arose in its territory.
This decision aligns India with other jurisdictions like the US, England, and Singapore, where courts recognize crypto as property for remedial purposes. In the US, federal courts freeze wallets under Rule 65; English courts grant proprietary injunctions as in AA v Persons Unknown; and Singapore's High Court has issued freezing orders in cases like CLM v CLN. By prioritizing property rights, the ruling may limit exchanges' ability to redistribute user holdings during financial distress and affirm local courts' authority over domestically accessed assets.