Landmark Indian court ruling recognizes virtual currency as property

The Madras High Court has ruled that virtual currencies can be considered property under Indian law. The judgment was handed down by Justice N. Anand Venkatesh, who said that although digital assets are not physical objects or legal tender, they still have all the key characteristics of property.

Justice Venkatesh noted that digital assets are identifiable, transferable, and controlled only by private keys, and these features qualify them as property. In a statement, the judge argued that there is no question that virtual currencies are assets, emphasizing that virtual currencies are neither tangible assets nor currencies. However, he emphasized that it is property that can be owned and enjoyed and held in trust.

Indian High Court rules that virtual currency is property

The need for clarification arose following the cyber attack on WazirX, a virtual currency exchange platform operated by Zanmai Labs Pvt Ltd. One investor had purchased around 3,532 XRP tokens worth Rs 100 million. In January 2024, 198,516 (approximately $2,260) were used on the platform. Later that year, the platform revealed that its cold wallet had been hacked, resulting in losses of over $230 million in Ethereum and other ERC-20 tokens. After the hack, all functionality was disabled and user accounts, including those of investors, were frozen.

The investor is now seeking legal protection, claiming that her XRP tokens are different from the Ethereum tokens that were deposited with WazirX and then stolen. She asked the court for protection under Section 9 of the Arbitration and Conciliation Act 1996 to prevent virtual currency exchanges from redistributing her holdings. Zanmai and its directors, however, object to this, noting that the company is making this exercise based on a Singapore court order requiring all users to bear the losses.

Zanmai Labs’ claims were rejected by Judge Venkatesh, who argued that only Ethereum-based tokens were affected and that the applicant’s XRP coins were not part of the hack. “The applicant held as a cryptocurrency were 3532.30 XRP coins. It was the ERC 20 coins that suffered the cyberattack on the WazirX platform on July 18, 2024, and these are completely different cryptocurrencies that the applicant does not hold,” the court said.

Justice Venkatesh says jurisdiction applies

In his judgment, Justice Venkatesh said that in addition to being identifiable and transferable, digital assets can be controlled through private keys. He also referred to Section 2(47A) of the Income Tax Act 1961, which recognizes virtual currencies as virtual digital assets. “Under the Indian legal system, virtual currencies are treated as virtual digital assets and not as speculative transactions,” he added.

The court also rejected the argument that it lacked jurisdiction over the case because the arbitration took place in Singapore. The report cited the Supreme Court’s judgment in PASL Wind Solutions Pvt Ltd vs. GE Power Conversion India Pvt Ltd (2021) and pointed to case law that means Indian courts have the right to protect assets located in India. The high court held that the case fell under its jurisdiction as the transaction took place in Chennai and the investors in the case used Indian bank accounts.

Justice Venkatesh also pointed out that Zanmai Labs is registered with India’s Financial Intelligence Unit (FIU) and is authorized to handle digital assets in India. He emphasized that in this case, exchanges registered as reporting entities in the country are authorized to handle cryptocurrency transactions. “Neither Zettai nor Binance are registered as reporting entities in India,” he said. He added that crypto exchanges must follow the same corporate governance standards as other companies.