Indian Court Ruling Affirms Cryptocurrency as Property
By: Eva Baxter
In a landmark decision, the Madras High Court in India has ruled that XRP, the digital currency associated with Ripple, is considered property and not simply a speculative asset. This ruling came in the midst of a dispute involving the cryptocurrency exchange platform WazirX, which was attempting to reallocate 3,532.30 XRP coins belonging to a customer named Rhutikumari. The court's decision sets a significant precedent that may impact how cryptocurrencies are handled in insolvency scenarios worldwide, as well as within India. Justice N Anand Venkatesh led the ruling, reinforcing the idea that cryptocurrencies like XRP are virtual digital assets capable of being held and owned in beneficial ways, rather than being treated as speculative transactions.
Justice Venkatesh based his decision on Section 2(47A) of the Income Tax Act, defining virtual digital assets as properties that can be enjoyed and possessed. This distinction is essential, as it shifts how user assets might be viewed during financial distress or restructuring of an exchange. WazirX, which faced restructuring under Singapore’s jurisdiction, argued against the Madras High Court’s jurisdiction, citing arbitration clauses centered in Singapore. However, the court maintained its jurisdiction due to the transactional activities initiated from India. This ruling could have broad implications for cryptocurrency exchanges globally, especially when user funds are held in currencies like USDC, and cases of theft or mismanagement arise.
The judgment aligns with views in other major jurisdictions such as the United States, the United Kingdom, and Singapore, where courts have recognized cryptocurrencies as property eligible for protection under various legal frameworks. In the US, digital assets often are treated as property for tax and remedial purposes, while the UK has moved towards officially codifying these digital assets as property. The Indian ruling further emphasizes the requirement for exchanges to respect these proprietary interests, preventing platforms from redistributing customer crypto assets unilaterally.
As India joins global efforts to prioritize property rights in the realm of digital assets, this ruling could serve as a catalyst for more robust consumer protections and clear legal frameworks similar to those seen in English courts. Such developments are crucial, particularly in safeguarding consumer interests in situations where exchanges face operational challenges or financial disruptions.
