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In a landmark judgment, the Madras High Court on Monday officially classified cryptocurrency as “property” under Indian law. This means, like property, cryptocurrencies can be owned, possessed, and held in trust, extending the same legal protection the law has for other forms of property. The decision, widely welcomed by India’s crypto community, establishes that a user’s holdings on an exchange cannot be arbitrarily frozen, redistributed, or written off without due legal process. It also means that cryptocurrencies can be “held in trust,” effectively redefining the relationship between investors and exchanges. This shifts the custodial responsibility squarely onto platforms, requiring them to maintain higher standards of governance, transparency, and segregation of client assets, similar to traditional financial institutions, explained Edul Patel, CEO of Indian crypto exchange Mudrex. The ruling also sets a precedent for investors to seek recourse in cases of fraud or misuse as well as exchange failures, as in the case of WazirX. The ruling came during a hearing for an investor who held XRP holdings that were frozen on the WazirX exchange following a 2024 cyberattack. The Madras High Court granted interim protection and ordered WazirX’s Indian entity to furnish a bank guarantee to the investor’s assets until arbitration concludes. By bringing about this clarification, crypto exchanges are held fiduciarily responsible for safeguarding user assets and are pushed to act in the best interests of their clients. For instance, the ruling blocked WazirX’s attempt to socialise losses from the cyberattack and upheld the investor’s ownership rights. Additionally, the ruling opens the door for investors to seek legal remedies within the Indian court system for disputed and frozen digital assets, establishing that Indian courts can exercise jurisdiction even if the exchange’s parent company is based in a different country. The crypto community hailed the ruling as a stepping stone towards bringing about a right regulatory framework to govern the asset class—a long-standing demand from the Indian crypto ecosystem. "The Madras High Court’s decision to recognise cryptocurrency as property provides an important step towards greater clarity in how digital assets are viewed under Indian law. It suggests a maturing perspective on this evolving asset class and indicates that cryptocurrencies are beginning to be seen as having legitimate economic relevance within existing legal and financial frameworks,” said Avinash Shekhar, Co-founder and CEO, Pi42. The firm is one of India’s first INR-based crypto futures platforms. However, the ruling also calls for nuanced regulation that distinguishes between crypto as an asset and crypto as an infrastructure, according to Patel. “India must now look beyond just classifying crypto as an asset and recognise its role as a technology that powers innovation. The focus should be on creating rules that both safeguard investors and allow the growth of blockchain and Web3 to continue,” he said, while also hailing the move to recognise the asset class as property. Despite being a move in the right direction, the ruling also brings about certain concerns. For instance, the ruling does not differentiate between various types of crypto tokens, such as government tokens, utility tokens, and NFTs. “Treating all crypto tokens as property could create problems since different tokens serve different purposes. For example, governance tokens like UNI from Uniswap are used to vote on decisions within a decentralised protocol, not for profit. If such tokens were taxed or regulated as property, every on-chain vote could be seen as a taxable transaction, which would be impractical, as no money is actually being made. A similar case would come up for stablecoins, where it is largely being used for cross-border transactions rather than making profits,” Patel explains. Moreover, the ruling also does not specify the extent of the exchanges’ fiduciary duty, and these nuances can only be determined through future legal precedents, experts noted. “The decision by the Madras High Court recognising cryptocurrency as property under Indian law is a landmark moment for digital-asset clarity in India. By emphasising that tokens are ‘capable of being enjoyed and possessed… held in trust’ and tying the reasoning to the Income Tax Act’s definition of virtual digital assets, the Court has provided a much‐needed foundation for investor rights, custodial accountability and regulatory certainty. While this does not yet resolve all questions on classification, taxation or custody obligations, it signals a meaningful shift toward treating crypto-assets as bona fide proprietary rights—a development that will likely encourage further regulatory evolution, institutional participation and investor confidence in India’s Web3 ecosystem,” said Aishwary Gupta, Global Head of Payments at Polygon Labs. Under Indian law, a High Court’s interpretation of a central statute is applicable nationwide, unless another High Court rules differently or the Supreme Court stays the decision. In the case of the WazirX hack, the Madras High Court interpreted how the Income Tax Act treats cryptocurrencies, which means that other courts may look to this ruling for guidance when handling similar cases. (Edited by Megha Reddy)
