Recognition Of Cryptocurrencies As Property By The Madras High Court

On October 25, 2025, the Madras High Court delivered a significant ruling in the case of Rhutikumari vs Zanmai Labs Pvt. Ltd.¹ (O.A. No. 194 of 2025), in which it clearly stated that cryptocurrencies are considered "property" under Indian law. The Court acknowledged that digital assets can be owned, possessed, and enjoyed, and they may also be held in trust. This ruling represents the first clear judicial declaration in India recognizing cryptocurrencies as legally protected proprietary rights.

1. Background of the Case

The conflict stemmed from the WazirX cyberattack in July 2024, during which hackers infiltrated one of the exchange's cold wallets, resulting in losses that surpassed USD 230 million across a range of digital tokens. In retaliation, WazirX (via its Indian operator Zanmai Labs) suspended user accounts and launched a restructuring plan that the Singapore High Court endorsed, suggesting pro-rata compensation through a scheme of arrangement. The petitioner, who possessed 3,532.30 XRP coins, contested this method and requested interim protection from the Madras High Court, contending that her assets had been unjustly frozen and needed safeguarding while awaiting arbitration.

2. Key Legal Findings

1. Acknowledgment of Cryptocurrencies as Assets

The High Court conducted an in-depth analysis of the legal parameters surrounding "property" in the context of Indian law. Citing significant precedents from the Supreme Court, such as Ahmed G.H. Ariff v. Commissioner of Wealth Tax² and Jilubhai Nanbhai Khachar vs State of Gujarat³, the Court reiterated that the definition of property is extensive and includes more than just physical assets or legally recognized currency. It also covers intangible interests that can be identified, transferred, and enjoyed for one's benefit. By applying these concepts, the Court concluded that cryptocurrencies clearly fit within this broad definition, as they represent exclusive ownership, can be controlled via private cryptographic keys, and have verifiable economic and exchangeable value.

The court observed that:

"It is not tangible property nor is it a currency. However, it is a property which is capable of being enjoyed and possessed (in a beneficial form). It is capable of being held in trust."

2. Classification as Virtual Digital Assets and Legal Substance

The ruling confirmed that cryptocurrencies are classified as "virtual digital assets" in accordance with Section 2(47A) of the Income-tax Act, 1961, and should not be regarded as mere speculative instruments. The Court pointed out that Indian legislation already acknowledges cryptocurrencies within this legal framework, which encompasses assets that can be stored, traded, and sold, and differentiates them from speculative transactions for taxation purposes. In this regard, the Court emphasized that investing in cryptocurrencies entails converting Indian currency into digital assets that have measurable economic value, thereby reinforcing their substantive legal and commercial significance beyond mere speculation.

The Court also highlighted that such assets exhibit fundamental characteristics of property, thus aligning their legal treatment under property and fiduciary law with other recognized proprietary interests. This interpretation not only harmonizes India's stance with international judicial trends but also offers essential legal clarity for investors and market participants engaged in the digital asset landscape.

Furthermore, the ruling stressed that Indian courts have the authority to provide protective relief over these assets under Section 9 of the Arbitration and Conciliation Act, 1996, even if the arbitration is conducted abroad, provided the assets are located in India and necessitate protection, thereby enhancing investor safeguards in cross-border disputes related to crypto holdings.

3. Fiduciary Obligations and Interim Relief

The Court determined that when cryptocurrencies are possessed by intermediaries or exchanges, they should be regarded as trust-held assets, thus imposing fiduciary duties on these intermediaries to protect user assets and refrain from reallocating, redistributing, or otherwise interfering with them without the owner's permission. This responsibility stems from the inherent nature of the proprietary rights acknowledged in the ruling, which stipulates that digital assets entrusted to a platform remain the user's property and cannot be unilaterally diminished or seized by the custodian.

In applying this principle, the Court concurred with and supported the reasoning of the Bombay High Court in Zanmai Labs Pvt. Ltd. v. Bitcipher Labs LLP⁴, which similarly highlighted that virtual digital assets held electronically by exchanges must be preserved in trust, with the corresponding fiduciary duties owed to users, dismissing the idea that exchanges serve merely as facilitators devoid of custodial responsibilities.

In the specifics of the case, the Madras High Court noted that the petitioner's XRP holdings were separate from the ERC-20 tokens impacted by the WazirX cyber-attack and therefore should not fall under a scheme of pro-rata loss socialization proposed by the exchange's restructuring process. Consequently, it granted interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, instructing the respondent to maintain the status quo and protect the petitioner's assets while arbitration is pending, underscoring that exchanges bear enforceable legal obligations to safeguard user assets held in trust.

This conclusion enabled the Madras High Court to provide interim protective measures under Section 9 of the Arbitration and Conciliation Act, 1996, safeguarding the petitioner's cryptocurrency assets while awaiting the arbitration's conclusion, even though the arbitral seat was located in Singapore. The Court emphasized that Indian courts maintain the authority to implement asset-preservation actions when the relevant assets are situated within India, thereby guaranteeing effective safeguarding of proprietary interests throughout the duration of foreign-seated arbitration proceedings.

3. Why This Ruling Matters?

The ruling issued by the Madras High Court marks a pivotal moment in the progression of India's jurisprudence regarding digital assets, carrying extensive legal and commercial ramifications.

1. Enhanced Legal Protection for Investors

By acknowledging cryptocurrencies as legally protected property, the Court has confirmed that investors possess enforceable proprietary rights as per Indian law. This acknowledgment permits investors to pursue effective remedies, which include interim injunctions, asset preservation orders, recovery actions, and enforcement measures against exchanges or custodians. Importantly, such protection applies even when dispute resolution clauses stipulate foreign-seated arbitration, thereby bolstering investor confidence and access to justice in international crypto conflicts.

2. Imposition of Fiduciary Standards on Crypto Platforms

The Court's determination that crypto exchanges and intermediaries hold user assets in trust significantly raises the expectations for the standard of care from these platforms. Exchanges are now recognized not merely as technology facilitators but as fiduciaries who owe duties of loyalty, care, segregation of assets, and prevention of misappropriation. This aligns the crypto ecosystem with well-established principles that govern custodians, trustees, and financial intermediaries, thereby enhancing accountability and user protection.

3. Convergence with Global Jurisprudence

This ruling aligns India with prominent international judicial trends. Courts in jurisdictions such as the United Kingdom, Singapore, Hong Kong, and New Zealand have previously acknowledged cryptocurrencies as property that can be owned, traced, and held in trust. The Madras High Court's perspective reflects a comparable functional and rights-based comprehension of digital assets, reinforcing India's standing in global fintech and digital finance discussions.

4. Clarification in an Evolving Regulatory Landscape

Although India has yet to establish a comprehensive legislative framework for cryptocurrencies, this ruling offers essential judicial clarity amidst previous regulatory ambiguity. By affirming the proprietary status of crypto assets and recognizing them as virtual digital assets under existing laws, the decision lays a foundational legal structure likely to impact future developments in taxation, estate and succession planning, secured lending, insolvency proceedings, and anti-money laundering compliance. It also provides direction for regulators and policymakers as India continues to refine its approach to digital assets and financial innovation.

This ruling not only addresses an immediate dispute but also establishes doctrinal certainty, positioning Indian courts as proactive participants in the global legal framework governing digital assets.

4. Wider Industry Response

The ruling has been embraced as it offers essential legal acknowledgment and safeguards for investors in a landscape that has struggled with regulatory vagueness and uncertainty regarding the classification of virtual digital assets.

Experts have particularly highlighted that the Court's clear designation of cryptocurrencies as property eligible for trust ownership fills significant voids in India's legal framework for digital assets. This newfound clarity is regarded as essential, especially in light of notorious exchange breaches like the 2024 WazirX hack, which led to the loss of over USD 230 million in tokens and left numerous investors dealing with frozen accounts and pending claims.

It has been observed that the ruling not only upholds the proprietary rights and fiduciary responsibilities of intermediaries but also strengthens judicial intervention as a tool for investor protection, especially in scenarios where legislative and regulatory actions have been sluggish or inconsistent. Many perceive the judgment as aligning India with international judicial practices that recognize digital assets as property, while simultaneously promoting the need for clearer legislative and regulatory structures in a rapidly changing environment.

5. Way Forward

While the ruling from the Madras High Court is currently applicable only within its own territorial limits, its persuasive influence is expected to reach far beyond those borders. The reasoning employed by the Court may have an impact on other High Courts and, ultimately, the Supreme Court of India, especially when resolving disputes related to the legal nature and treatment of digital assets.

This judgment is anticipated to: -

1. Influence future decisions regarding the definition and categorization of cryptocurrencies and other digital assets
2. the nature and scope of ownership rights in crypto wallets and assets managed through exchanges or custodial platforms
3. The resolution of international disputes concerning jurisdiction, arbitration seats, and asset locations
4. the range of remedies accessible to crypto holders in insolvency, restructuring, and enforcement situations.

In the ongoing absence of comprehensive and dedicated cryptocurrency legislation, judicial decisions of this kind gain increased importance. They increasingly serve as the main source of legal direction, continuously shaping India's developing legal landscape for digital assets through a principled interpretation of existing statutory and common law principles.

Footnotes

1 2025: MHC:2437

2 (1969) 2 SCC 471

3 [1995 Supp (1) SCC 596]

4 Commercial Arbitration Petition (L) No. 11646 of 2025

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