Madras High Court recognises cryptocurrency as property under Indian Law

Cryptocurrency is a property capable of being enjoyed and possessed (in a beneficial form), the Madras High Court said on Saturday, adding it can be ‘held in trust.’

Hearing the Zanmai Labs Pvt Ltd (WazirX Indian branch) vs a crypto investor whose 3,532.30 XRP currency holdings were frozen after a July 2024 cyberattack, Justice N Anand Venkatesh acknowledged that even if crypto was an intangible and not a legal tender, it still possessed the fundamental features of property, Bar and Bench reported.

The court stated that cryptocurrencies “have the essential characteristics of property” even if they are intangible and not legally recognised money.

“There is no doubt that ‘cryptocurrency’ is a property. It is not a tangible property, nor is it a currency. However, it is a property that can be enjoyed and possessed (in a beneficial form). It is capable of being held in trust,” said the court.

According to the court, tokens are digitally stored but are still defined, identifiable, transferable and capable of exclusive control by private keys – all these characteristics are enough to confer a proprietary character on them even if they are merely data on a blockchain.

The Madras High Court went beyond the definition of ‘property’ under Indian law and referred to Supreme Court rulings in the cases of Ahmed GH Ariff vs CWT and Jilubhai Nanbhai Khachar vs State of Gujarat.

Justice Venkatesh stated that cryptocurrency should not be regarded as a ‘speculative transaction’ because it is a ‘virtual digital asset’ as per Section 2(47A) of the Income Tax Act, 1961.

“Under Indian law, crypto is a virtual digital asset and not a speculative transaction. The reason is that the user’s investment is converted into crypto, which can be traded, stored, and sold. Cryptocurrency is a virtual digital asset, and it’s regulated under Section 2(47A) of the Income Tax Act, 1961,” the court explained.

The court believed the applicant was using the WazirX platform from their location in India and was utilising her Kotak Mahindra Bank account money from Chennai to buy crypto assets. It was thus determined that a part of the cause of action had arisen within the territorial jurisdiction of the Madras High Court.

Justice Venkatesh explained that while Zanmai Labs’ parent company, Zettai Pte Ltd, based in Singapore, and its former foreign partner Binance were not registered entities under Indian law, the local branch of Zanmai Labs was a filer with the Financial Intelligence Unit (FIU) India. According to the court, this difference strengthened the domestic connection of the applicant’s claim.

The apex court gave the green light to the Indian courts’ intervention through temporary relief under Section 9 in PASL Wind Solutions Pvt Ltd v. GE Power Conversion India Pvt Ltd (2021) in situations where assets located in India need safeguarding.

The decisions of the trial court resulted in the granting of interim relief in the conflict that prevented Zanmai Labs and its directors from the investor’s shares redistribution or reallocation until the panel could arbitrate and come to a decision.