[Ashwasti Shravani is a 4th year B.B.A., LL.B. (Hons.) student at the National Law University Odisha)]
On 25 October 2025, the Madras High Court delivered a landmark judgment in Rhutikumari v. Zanmai Labs Pvt. Ltdclassifying cryptocurrency as “property” under Indian law, giving legal recognition to investors’ ownership rights and establishing that crypto exchanges function as fiduciaries holding digital assets in trust. This post will delve into the legal nature of cryptocurrency in light of the Madras High Court’s ruling and, more broadly, the existing regulatory framework in India.
In July 2024, WazirX, a leading Indian cryptocurrency exchange run by Zanmai Labs Pvt. Ltd., along with its Singapore-based parent Zettai Pte. Ltd, faced a large-scale cyberattack. The attack led to hackers illicitly siphoning off USD 234 million in Ethereum-based ERC-20 tokens, amounting to nearly 45% of the platform’s total asset base In response, WazirX promptly suspended all user accounts, halting withdrawals, trading activity, and asset liquidation.
Rhutikumari, a WazirX user who invested Rs. 1,98,516 in January 2024 to purchase 3,532.30 XRP coins, valued at approximately Rs. 9.55 lakhs by January 2025, found her account frozen despite her holdings being completely unaffected by the hack. The cyberattack had targeted ERC-20 tokens stored in separate wallets. However, Zettai proposed a “socialization of losses” through a scheme of arrangement approved by the Singapore High Court, under which losses would be shared proportionately by all users, regardless of the cryptocurrency they held or whether their assets were impacted. Rhutikumari filed an application under section 9 of the Arbitration and Conciliation Act seeking interim protection after her XRP holdings were reduced to offset losses from an attack that had not affected her assets.
The dispute shed light on a longstanding legal blind spot in India whether cryptocurrency constitutes property under Indian law, a classification that has remained uncertain within the existing legal framework.
India’s Current Legal Framework for Cryptocurrency
The Madras High Court examined how Indian law currently defines cryptocurrency and found legislative recognition, albeit limited to taxation. The Court noted that cryptocurrency is termed as a “virtual digital asset” and is governed currently under section 2(47A) of the Income Tax Act, 1961. This section defines a “virtual digital asset” as any information, code, number, or token generated through cryptographic means, providing a digital representation of value, functioning as a store of value or unit of account.
The Court significantly emphasized that cryptocurrency is not treated as a speculative transaction under tax law. This exclusion recognizes that investment made by users that is converted into cryptocurrency capable of being stored, traded, and sold constitutes the characteristics of property. The Finance Act, 2022 introduced section 115BBH, taxing transfers of virtual digital assets at 30%, with tax deducted at source at 1% under section 194S. This taxation framework constitutes legislative recognition that cryptocurrency is an asset capable of generating taxable income from transfer. The Court acknowledged that beyond taxation, India lacks a unified regulatory framework. However, it emphasized that to operate cryptocurrency services within India, providers must register as “reporting entities” with the Financial Intelligence Unit under the Prevention of Money Laundering Act. In this case, only Zanmai Labs (the Indian entity) held such registration, not the foreign entities, establishing clear regulatory accountability for the Indian operations
Judicial Evolution: From the Reserve Bank of India’s (RBI) Circular to Property Recognition
The Supreme Court in Internet and Mobile Association of India v. Reserve Bank of India upheld the RBI’s regulatory powers over banking services linked to virtual currencies but struck down its 2018 circular banning banks from servicing crypto businesses as excessive and disproportionate. The Court emphasized the RBI’s sovereign role in safeguarding monetary and banking stability and acknowledged that virtual currencies are intangible digital assets with regulatory risks. The Court observed that any attempt to define a virtual currency might be approached in the spirit of the Vedic concept of “neti, neti”—“not this, not that”, something that cannot be fully captured in words. Calling it a “currency” is misleading. Unlike a 100 rupee note, whose value is fixed, a cryptocurrency is worth only what buyers and sellers agree it is. Bitcoin, Ethereum, and Dogecoin exist as streams of ones and zeros on a blockchain, created not by central banks, but through mining and problem-solving that extend the ledger.
They are often called digital assets, but that does not make them assets in the traditional sense. Ownership is tracked on the blockchain via public and private keys, which are stored in digital wallets. Unlike dematerialized shares, which represent real business interests and can yield tangible returns in liquidation, cryptocurrencies have no underlying real-world value.
The Property Test: Constitutional and Statutory Interpretation
The Madras High Court applied the constitutional jurisprudence of “property” developed over decades interpreting Articles 19(1)(f) and 300A of the Indian Constitution to cryptocurrency. In Ahmed G.H. Ariff v. Commissioner of Wealth Tax (1969), the Supreme Court of India held that property is a term of the widest import, encompassing every interest a person can hold or enjoy, subject to context. It observed that even interests combining elements of office and property, such as Mahantship or Shebaitship, fall within the ambit of property under Article 19(1)(f) of the Constitution and deserve a liberal interpretation. The Court further recognized that annuities, though payable periodically, can constitute property, as they are capable of being valued, transferred, and inherited. This demonstrates that property extends beyond tangible assets to various intangible proprietary rights.
In another case, Jilubhai Nanbhai Khachar v. State of Gujarat (1995), the Supreme Court reiterated that property includes an aggregate of rights guaranteed by law, covering both tangible and intangible assets, ownership rights, and the exclusive right to use, possess, and dispose of things. Property thus encompasses everything with exchangeable value, including incorporeal or invisible assets.
In the instant case, Justice Venkatesh of the Madras High Court held that cryptocurrency qualifies as property by applying these principles. While it is neither tangible nor a currency, cryptocurrency is capable of being enjoyed, possessed in a beneficial form, and held in trust.
Lessons from Cryptopia
From an international perspective, the Madras High Court drew heavily on the New Zealand High Court’s decision in Ruscoe v. Cryptopia Ltd (2020 NZHC 728), which held that cryptocurrencies are a form of intangible property capable of being held on trust. That Court reasoned that despite being digital data, cryptocurrencies possess three interdependent features establishing their proprietary nature: (1) a public key recording the unit of currency, (2) control and stability through private keys, and (3) generation of a fresh private key upon each transfer. These features work in combination; no single element alone suffices, but together they transform digital code into something more substantial: “Although it is only a series of 1s and 0s, it is more than mere information. It is a type of property and it is capable of being held on trust.”
The New Zealand Court further emphasized that cryptocurrencies held by Cryptopia were subject to trust because the exchange held private keys exclusively and maintained clear records of holdings, demonstrating certainty of subject matter, objects, and intention to create a trust. This established that cryptocurrencies can indeed form the subject matter of a trust under New Zealand law, reinforcing their status as property distinct from mere informational content.
Applying this reasoning, the Madras High Court found that WazirX, through Zanmai Labs and Zettai, held private keys, maintained clear records, and operated under agreements indicating custody, not ownership. As a result, investors like Rhutikumari were beneficial owners of their crypto holdings, which were protected from insolvency claims and could not be reallocated to cover unrelated losses.
Way forward
India urgently needs comprehensive cryptocurrency legislation beyond taxation. Parliament should enact a standalone law defining crypto as property, setting custody standards, fiduciary duties, investor protections, and cross-border enforcement. Regulations must mandate the segregation of user assets, require exchanges to maintain distinct wallets with clear ownership records, and prevent schemes that dilute individual property rights, ensuring robust protection for India’s growing crypto ecosystem.
– Ashwasti Shravani
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