Why in the News?

In a historic first for India, the Madras High Court has recognized cryptocurrency as “property” under Indian law, providing judicial validation to digital assets long trapped in a regulatory grey zone.

What is Cryptocurrency?

• Overview: Cryptocurrency is a digital or virtual currency that uses cryptography for security, making it difficult to counterfeit or double-spend.
• Nature: It is decentralized, operating on blockchain technology — a distributed ledger maintained across a network of computers.
• Key Features: Pseudonymity, transparency, global accessibility, and independence from central banks.
• Examples: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and others.
• Function: Used as a medium of exchange, store of value, or investment asset, depending on its design and acceptance.

Case Details:

• Case Title: Rhutikumari vs Zanmai Labs Pvt. Ltd. (WazirX Operator) — Madras High Court, October 25, 2025.
• Context: WazirX froze the petitioner’s account after a $230 million crypto hack (July 2024), even though her assets (3,532 XRP) were unrelated to the theft.
• Petitioner’s Argument: Her cryptocurrency holdings constituted private property wrongfully frozen without due process.
• Respondent’s Defence: The freeze was a security measure, and disputes should be referred to Singapore arbitration.
• Court’s Decision: Justice N. Anand Venkatesh ruled that cryptocurrencies, though intangible, qualify as property since they can be owned, possessed, transferred, and enjoyed.
• Order: WazirX directed to deposit ₹9.56 lakh in escrow until arbitration concludes.
• Precedents Cited:
  • Ruscoe v. Cryptopia Ltd (New Zealand): Crypto assets recognized as property held in trust.
  • AA v. Persons Unknown (UK): Bitcoin acknowledged as an asset capable of ownership and protection.

Legal Implications of the Ruling:

• Recognition of Ownership Rights: Establishes that cryptocurrency holders have property rights enforceable under Indian civil law.
• Investor Protection: Enables crypto investors to seek injunctions, escrow relief, and proprietary claims in disputes with exchanges.
• Liability of Exchanges: Exchanges can be held accountable for wrongful freezing or security failures; “force majeure” cannot justify loss of investor assets.
• Insolvency Proceedings: Cryptocurrencies can now be treated as assets of an estate, strengthening recovery mechanisms in bankruptcy or liquidation.
• Judicial Precedent: First Indian ruling to recognise crypto as legally protectable property, likely to influence future regulatory and tax interpretation.

Legal Status of Cryptocurrency in India (as of 2025):

• Legality: Cryptocurrencies are not legal tender but are legal to hold, trade, and invest within a regulated framework.
• Taxation:
  • Classified as Virtual Digital Assets (VDAs) under the Finance Act, 2022.
  • 30% tax on gains; 1% TDS on trades above threshold limits.
• Regulatory Oversight:
  • RBI: Monitors systemic risk; does not recognize crypto as currency.
  • SEBI: Supervises investment-related aspects.
  • FIU-IND: Enforces anti–money laundering compliance under PMLA (2023 extension).
• Judicial Framework: Supreme Court (2020) struck down the 2018 RBI ban, enabling continued operation of exchanges.
• RBI Policy Direction:
  • Promotes Digital Rupee (CBDC) as a regulated alternative.
  • Allows limited banking access to compliant crypto entities under strict KYC/AML rules.

Conclusion:

• Crypto is legal to own and trade, taxable as VDA, non-tender, and subject to compliance norms.
• The Madras High Court ruling elevates its status from a digital asset to a judicially recognized form of property, filling a key legal gap in India’s crypto regulation.

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