India's Court Recognizes Crypto as Legal Property in Landmark Ruling

India's Madras High Court has delivered a landmark ruling recognizing cryptocurrency as a form of property under Indian law, halting WazirX from redistributing a user's frozen XRP holdings amid the exchange's post-hack restructuring. The decision, issued by Justice N. Anand Venkatesh on October 25, marks a pivotal shift in how digital assets are legally categorized in the country, offering new protections for investors caught in cross-border crypto disputes, according to Coinpedia.

The case centers on Rhutikumari, a Chennai-based investor who held 3,532 XRP tokens on WazirX, which were unaffected by the platform's $230 million hack in July 2024. Following the breach, WazirX froze user accounts and initiated a Singapore-based restructuring plan, proposing to redistribute assets through a "socialized loss" scheme. However, the court rejected this approach, ruling that cryptocurrency is a "property capable of being enjoyed, possessed, and held in trust," the Coinpedia piece noted, and directed the exchange to provide a ₹9.56 lakh ($11,500) bank guarantee to safeguard Rhutikumari's holdings until arbitration concludes.

The ruling challenges WazirX's attempt to bind Indian users to its offshore restructuring, which was approved by Singapore's High Court on October 13, according to Yahoo Finance. Justice Venkatesh emphasized that since Rhutikumari's investment originated from her Indian bank account and was managed through the locally operated WazirX platform, the Madras High Court retained jurisdiction under Section 9 of the Arbitration and Conciliation Act, a point highlighted by LawBeat. This decision aligns with global precedents, including New Zealand's Cryptopia ruling, which described crypto as "intangible property capable of being held on trust."

WazirX, which resumed trading on October 24 after a 16-month hiatus, has faced mixed reactions. While some users welcomed the phased reopening—allowing zero-fee trading of USDT/INR pairs—others criticized the continued suspension of withdrawals. The exchange's restructuring plan promises to return 85% of user balances by July 2024, with the remainder to be distributed over three years, according to the Economic Times. However, users report only partial fund recovery and unresolved access issues.

The court's decision also critiques WazirX's "socialization of losses" model, calling it "untenable and beyond the contractual framework." This mirrors a recent Bombay High Court ruling that blocked similar redistribution efforts by crypto firm Bitcipher Labs. Legal experts argue the Madras ruling reinforces fiduciary duties for exchanges, positioning India's judiciary as a key arbiter in crypto rights amid regulatory stagnation.

For India's crypto sector, the judgment sets a precedent for treating digital assets as property, potentially influencing future insolvency cases and investor protections. Sudhakar Lakshmanaraja of Digital South Trust noted the ruling "strengthens consumer protection and paves the way for clearer regulatory frameworks," as reported by Decrypt. Yet, the government's 30% tax levy on crypto transactions and lack of comprehensive investor safeguards remain contentious.

As WazirX navigates its relaunch, the Madras High Court's intervention underscores the growing legal and regulatory complexities in India's crypto landscape. With thousands of users still awaiting restitution, the case highlights the tension between offshore restructuring and domestic legal rights—a conflict now firmly anchored in India's judicial system.