Madras High Court Rules Cryptocurrencies as Legal Property
The Madras High Court has officially ruled that cryptocurrencies are property under Indian law, granting XRP a new legal identity in India. Justice N. Anand Venkatesh delivered the judgment, emphasizing that digital assets like XRP are identifiable, movable, and managed through private keys, making them a distinct category of property.
Investor Dispute Over Cyberattack Losses
The case originated from a dispute involving an investor who purchased 3,532.30 XRP coins worth ₹1,98,516 on the WazirX exchange, operated by Zanmai Labs Pvt Ltd. In July, the exchange experienced a cyberattack that resulted in the loss of approximately $230 million in Ethereum and ERC-20 tokens. Following this incident, user accounts were frozen, and many investors reported that their funds remained inaccessible even after the platform resumed deposits.
Court Upholds Investor's Rights and Jurisdiction
The investor argued that her XRP holdings were separate from the stolen Ethereum assets and sought protection under Section 9 of the Arbitration and Conciliation Act, 1996. She contended that the exchange held her XRP in trust and therefore had no right to redistribute it. Zanmai Labs countered by stating that its Singapore-based parent company, Zettai Pte Ltd, was under a court order requiring all users to share losses from the hack. Justice Venkatesh rejected this argument, ruling that the XRP holdings were unaffected and legally belonged to the investor.
He clarified that under Section 2(47A) of the Income Tax Act, 1961, cryptocurrencies are defined as virtual digital assets and are recognized as property with quantifiable ownership rights. The court also confirmed that the Madras High Court has jurisdiction over the case because the investor's transaction involved an Indian bank account. Justice Venkatesh explained that Indian courts can safeguard assets located within India, even when arbitration agreements designate foreign jurisdictions.
Call for Stronger Oversight in Crypto Operations
Justice Venkatesh underscored the necessity for Zanmai Labs, which is registered with the Financial Intelligence Unit (FIU) in India, to adhere to proper corporate governance standards. He issued directives for cryptocurrency exchanges to separate client assets, maintain transparent records, and permit independent audits to safeguard investors. Furthermore, he emphasized the vital role of robust Know Your Customer (KYC) and anti-money-laundering (AML) measures in ensuring the integrity of India’s digital economy.
A Turning Point for India's Crypto Regulation
This ruling represents a significant moment for India's cryptocurrency framework, confirming that digital assets like XRP possess legal recognition as property. This development is expected to bolster investor confidence and establish a foundation for more structured governance within the crypto industry. By classifying XRP as property, the Madras High Court has set a precedent that could influence future legal cases involving digital assets, signaling a move towards a more secure and transparent environment for crypto investors in India.