A Digital Asset No More: How a Landmark Madras High Court Ruling Redefines Cryptocurrency as Legally Protected Property in India 

In a landmark ruling that fundamentally reshapes India’s legal landscape for digital assets, the Madras High Court, in the case of Rhutikumari v. Zanmai Labs Pvt. Ltd. & Ors., has formally recognized cryptocurrency as legally protected ‘property,’ capable of being owned, held in trust, and safeguarded through judicial interim measures.

This decision emerged from a dispute where the WazirX exchange, following a major hack, sought to redistribute user assets via a Singaporean restructuring scheme, but the court affirmed a fiduciary duty between the exchange and its users, declaring that the platform holds crypto in trust for the beneficial owner and cannot unilaterally reallocate specific holdings. By limiting the extraterritorial reach of foreign insolvency proceedings and reinforcing user property rights, the judgment sets a critical precedent that empowers investors, imposes higher custodial standards on exchanges, and forces a accelerated evolution of India’s crypto regulatory framework amid ongoing uncertainty.

A Digital Asset No More: How a Landmark Madras High Court Ruling Redefines Cryptocurrency as Legally Protected Property in India 

In a decision that sends ripples through the worlds of finance, technology, and law, the Madras High Court has fundamentally altered the legal landscape for cryptocurrencies in India. The ruling in Rhutikumari v. Zanmai Labs Pvt. Ltd. & Ors. is not just a legal footnote; it is a seismic shift that answers a question haunting Indian crypto investors for years: What, in the eyes of the law, do you actually own when you buy a Bitcoin or an XRP? 

The court’s answer is resounding and clear: you own property. 

This article delves beyond the headline to explore the profound implications of this judgment, unpacking how a single investor’s fight to recover her 3,532 XRP coins establishes a precedent that could redefine the relationship between users and crypto exchanges, challenge international insolvency proceedings, and force a faster evolution of India’s crypto regulations. 

The Human Story Behind the Legal Precedent 

Before it was a landmark case, it was a personal financial crisis. In January 2024, an investor named Rhutikumari invested nearly Rs 2 lakh to purchase a specific quantity of XRP on the WazirX platform. Like millions of users, she operated on the implicit trust that her assets were secure in her exchange wallet. 

Then came the hack—a catastrophic cybersecurity breach that siphoned approximately $230 million from the platform’s custodial wallets managed by Liminal Custody. WazirX’s response was to freeze all user accounts, halt trading, and initiate a restructuring process in Singapore. The proposed solution? A “scheme of arrangement” approved by the Singapore High Court that would see all affected users receive a pro-rata share of the remaining 55% of assets. 

For Rhutikumari, this was unacceptable. She didn’t invest in a fractional share of a pooled fund; she bought a specific, identifiable 3,532.30 XRP. The exchange’s plan felt less like a rescue and more like a forced, loss-making sale of her property. Her decision to challenge this in court, filing for an interim injunction under the Arbitration Act, set the stage for a legal confrontation with far-reaching consequences. 

The Core Legal Battle: Custodian vs. Facilitator 

The arguments presented by both sides cut to the very heart of how crypto exchanges define their role. 

The Petitioner’s Stand: A Breach of Fiduciary Trust Rhutikumari’s legal team argued that WazirX was not a mere facilitator but a custodian and trustee. When a user deposits funds or crypto into their WazirX wallet, a fiduciary relationship is created. The exchange holds the assets in trust for the user, who remains the beneficial owner. This distinction is critical. If her XRP was held in trust, it was never WazirX’s property to reallocate, regardless of a hack. The Singapore scheme, they contended, had no jurisdiction over her private contractual rights as an Indian user. 

The Respondent’s Defense: The Reality of a “Peer-to-Peer” Facilitation WazirX countered by leaning on the fine print of its user agreement, positioning itself as a neutral P2P platform. They argued that users bear the risk of hacks and that the actual asset holder was a Singapore-based entity, Zettai Pte. Ltd. Facing an asset shortfall affecting 4.3 million users, they presented the Singapore scheme as the only equitable and practical solution, binding under Singaporean law. 

The Landmark Ruling: A Three-Part Legal Revolution 

The Madras High Court’s decision to grant the injunction, restraining WazirX from redistributing Rhutikumari’s specific XRP holdings, was grounded in three revolutionary findings. 

1. Cryptocurrency is Legally Recognised as “Property”This is the cornerstone of the judgment. The court explicitly stated,“there can be no doubt that cryptocurrency is a property. It is not a tangible property nor is it a currency. However, it is a property, which is capable of being enjoyed and possessed (in a beneficial form).” 

By classifying crypto as property, the court grants it a legal status akin to real estate, stocks, or intellectual property. This means: 

• It can be owned and transferred. 

• It can be held in a trust. 

• It is protected under property laws, allowing for legal remedies like injunctions against interference. 

2. The User-Exchange Relationship is FiduciaryThe court saw through the “facilitation” argument, recognizing the inherent power imbalance. When users deposit money and crypto on an exchange, they relinquish direct control. The exchange, therefore, has afiduciary duty—a higher standard of care—to safeguard those assets. A hack, in this view, does not absolve the exchange of its responsibility; it is a failure of its custodial duty. 
3. Limiting the Extraterritorial Reach of Foreign InsolvencyThis may be the most impactful part of the ruling for global crypto operations. The court drew a line in the sand, stating that a Singaporean restructuring scheme could not override the contractual and property rights of an Indian user who did not consent to its jurisdiction. It upheld the principle ofparty autonomy, emphasizing that the arbitration clause in the user agreement (pointing to the SIAC) was the correct forum for dispute resolution, not a foreign insolvency court making decisions for all users en masse. 

Real-World Implications: What This Means for You 

This ruling is not an abstract legal theory; it has immediate and practical consequences for every stakeholder in the Indian crypto ecosystem. 

For the Everyday Investor: 

• Strengthened Rights: Your crypto holdings now have a stronger legal foundation. Exchanges can no longer as easily treat user assets as their own in a crisis. 

• Clarity in Crisis: If an exchange you use is hacked or becomes insolvent, this judgment empowers you to legally challenge any plan that involves seizing or forcibly redistributing your specific assets. 

• A Double-Edged Sword: While empowering, this could also complicate recoveries. In some cases, a swift pro-rata distribution might be preferable to years of legal battles. The ruling gives you the right to choose which path to take. 

For Crypto Exchanges and Custodians: 

• Higher Standards of Care: The “fiduciary” label imposes a heavy burden. Exchanges must now operate with the care of a bank, investing heavily in security, transparency, and segregation of user assets. 

• Re-evaluating Terms of Service: The fine print that once shielded exchanges may now be insufficient. User agreements must be meticulously drafted to reflect their true custodial role, or risk being overturned by courts. 

• Operational Complexity: Managing mass insolvencies or hacks just became much harder. Exchanges can no longer assume a one-size-fits-all solution from a friendly jurisdiction will apply to all users. 

For Regulators and Policymakers: 

• A Judicial Push: The court has effectively done the legislature’s job, providing a clear legal classification that pending crypto bills have yet to deliver. This forces the government’s hand to create a comprehensive regulatory framework that aligns with this “property” status. 

• The Custody Conundrum: Regulations will now need to explicitly define and govern the custodial services of exchanges, potentially requiring licenses, audits, and insurance mandates. 

The Road Ahead: Unresolved Questions and Future Battles 

While a monumental step, the Madras High Court ruling is a beginning, not an end. 

• The Taxation Question: Will the Income Tax Department now re-evaluate its stance of taxing crypto as a “virtual digital asset” rather than as capital property, which could have different implications for long-term holdings? 

• The Succession Question: If crypto is property, how is it inherited? This clarifies the process for including crypto assets in wills and navigating succession laws. 

• The Enforcement Question: How will this ruling be applied by other High Courts, and ultimately, the Supreme Court? Will it hold against future challenges? 

The Rhutikumari v. WazirX case is a definitive moment. It moves the conversation about cryptocurrency in India from the shadows of speculation into the clear light of legal doctrine. It affirms that in the digital age, value is not just about code on a blockchain; it is about rights, ownership, and the power of the law to protect them. For Indian investors, a digital asset is, finally, just an asset.