In a landmark judgment that could redefine how cryptocurrency is treated under Indian law, the Madras High Court has ruled that virtual digital assets (VDAs) such as cryptocurrencies qualify as “property” capable of being held in trust. The ruling, delivered in Rhutikumari v. Zanmai Labs Pvt. Ltd. (WazirX), marks one of the first judicial recognitions of crypto holdings as enforceable property rights in India and underscores the fiduciary responsibilities of exchanges toward their users.
Background of the Case
The dispute traces back to the July 2024 hack of WazirX, one of India’s largest cryptocurrency exchanges, in which over USD 230 million worth of assets were reportedly stolen. Following the incident, WazirX’s parent company proposed a global restructuring plan, approved by a Singapore court aimed at redistributing or “rebalancing” user assets to absorb the losses across all accounts. However, one user, Rhutikumari, objected to this reallocation. Her holdings in XRP (Ripple) tokens were unaffected by the hack, yet under the restructuring plan, a portion of her assets would have been used to offset losses of other users. Arguing that this was unfair and unauthorized, she approached the Madras High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection of her digital assets.
Indian Court’s Findings and Key Observations
Justice Senthil Kumar Ramamurthy, presiding over the case, made several crucial findings that are likely to set a precedent for future crypto disputes in India. First, the Court recognized cryptocurrency as “property” within the meaning of Indian law. It noted that crypto assets constitute “virtual digital assets” under Section 2(47A) of the Income Tax Act, 1961, and therefore represent an identifiable, valuable interest capable of ownership and protection. Second, the Court held that crypto assets are capable of being “held in trust.” This means that exchanges like WazirX, which act as custodians of users’ tokens, owe fiduciary obligations similar to trustees. They cannot unilaterally redistribute or appropriate user holdings without consent or due process. Third, the Court addressed the jurisdictional question. Although WazirX’s restructuring plan had been sanctioned by a Singapore court and the platform’s terms of use included an arbitration clause referring disputes to Singapore, the High Court found that it retained jurisdiction. The reasoning: the cause of action partly arose in India, as the petitioner accessed the exchange and transferred funds from India. As interim relief, the Court granted an injunction restraining WazirX from reallocating the petitioner’s XRP holdings. It also directed the exchange to provide a bank guarantee of approximately Rs 9.56 lakh, or deposit the equivalent value in escrow, pending resolution of the arbitration proceedings.
Implication for the Crypto Industry
The ruling carries far-reaching implications for both crypto investors and exchanges operating in India. By affirming that cryptocurrencies constitute property, the Court has strengthened the legal standing of digital assets and their holders. Users can now invoke property-based remedies such as injunctions or damages in disputes involving exchanges or custodial failures. For exchanges, the ruling establishes a higher standard of accountability. Platforms acting as custodians cannot treat user tokens as fungible or subject to internal redistribution without user consent. This recognition of fiduciary responsibility mirrors principles applied in traditional finance, signaling a move toward greater consumer protection in the digital asset ecosystem.
The judgment also underscores the tension between cross-border arbitration clauses and domestic jurisdiction. Indian courts, the ruling suggests, can still intervene to grant interim protection when a part of the transaction or loss occurs within India, even if the contract designates a foreign seat of arbitration.
What Lies Ahead
While the Madras High Court’s order provides strong interim protection to users, it is not a final determination of the dispute. Arbitration proceedings and potential appeals will likely determine the long-term fate of WazirX’s restructuring plan. Nonetheless, the decision is expected to embolden other users to seek similar protection, potentially leading to further litigation across Indian courts. Beyond WazirX, this ruling marks a pivotal moment in India’s evolving crypto jurisprudence. By recognizing virtual digital assets as property capable of being held in trust, the Madras High Court has not only reinforced user rights but also laid the foundation for a clearer, more accountable regulatory framework for the country’s digital asset industry.