In a landmark judgment, a judge at the Madras High Court has prohibited crypto exchange WazirX from reassigning a client’s XRP holdings. This ruling establishes that, under Indian law, cryptocurrency is recognized as a form of property. This precedent could significantly influence how exchanges manage user assets during insolvency cases, potentially impacting jurisdictions worldwide.
According to a report in The Times of India on October 25th, Justice N Anand Venkatesh decreed that WazirX is barred from reallocating or redistributing 3,532.30 XRP coins that belong to Rhutikumari. Rhutikumari acquired these assets by transferring funds from her bank account located in Chennai.
The court issued a preliminary restraining order, asserting its jurisdiction even after WazirX argued that a restructuring plan overseen by the Singapore High Court should govern the matter.
Justice Venkatesh clarified his decision stating:
“Cryptocurrency is viewed as a virtual digital asset, not as a purely speculative investment.”
The judgment referred to Section 2(47A) of India’s Income Tax Act, which addresses virtual digital assets, and determined that cryptocurrency “can be possessed and enjoyed beneficially, and it’s possible to hold it in trust.”
WazirX contended that they don’t own the crypto wallets, and all users would receive proportional compensation through a three-stage process supervised by the Singapore High Court following a security breach that had previously suspended withdrawals.
The exchange maintained that the Madras High Court lacked the authority to hear the case, given that the arbitration process was based in Singapore.
The court dismissed this argument. Justice Venkatesh pointed out that Rhutikumari transferred funds from within India, accessed the platform from within India, thus demonstrating that part of the legal cause originated within the jurisdiction of the Madras High Court.
This verdict treats cryptocurrency holdings as individual property entitlements, rather than unsecured claims within a bankruptcy situation.
XRP Status as Property Impacts Legal Actions Elsewhere
In the United States, courts commonly acknowledge cryptocurrency as property when determining remedies, even though regulatory classifications can differ among various agencies.
The New York state court implemented a temporary halt on the movement of stolen USDC in the LCX case and authorized serving legal documents via NFT. Federal courts also freeze wallets and seize cryptocurrency utilizing Rule 65 and civil asset forfeiture laws.
The possibility of relief against exchanges depends on the specific contract terms: customers who hold assets in pooled or “Earn” programs, where ownership is transferred, recover less compared to those with appropriate custody arrangements. In these arrangements, the platforms act as custodians as highlighted in the Celsius Earn ruling.
Courts in England recognize crypto as property and issue proprietary injunctions, asset freezing orders, and Bankers Trust orders that compel exchanges, even those located internationally, to provide information.
The case of AA v Persons Unknown established the framework for dealing with crypto assets in a Bitfinex ransomware incident. Similarly, Fetch.ai v Persons Unknown extended this approach to a Binance-related matter.
LMN v Bitflyer substantiated that disclosure orders can apply to overseas exchanges. The UK Parliament is actively working to formalize digital asset property concepts, following the Law Commission’s 2023 report, thus strengthening the legal basis for such orders.
| Issue | India | United States | United Kingdom | Singapore |
|---|---|---|---|---|
| Is crypto “property”? | Yes; explicitly recognized and “capable of being held in trust.” | Yes, for many applications (tax, property law; courts issue TROs, seizures). | Yes; courts view crypto as property justifying proprietary relief; government is codifying this legal status. | Yes; acknowledged across various tokens and NFTs; can be legally held in trust. |
| Can courts prevent an exchange from accessing user coins? | Yes; an interim injunction restricted WazirX from reallocating a customer’s XRP. | Yes, through TROs/preliminary injunctions and constructive-trust principles, but the platform’s Terms of Service can significantly impact the outcome (Celsius Earn). | Yes; proprietary injunctions and disclosure orders routinely apply to exchanges, including those operating abroad (AA; Fetch.ai; LMN). | Yes; proprietary and Mareva relief are granted; exchanges are compelled to disclose information. |
| Notable limits or complexities | The court asserted jurisdiction regardless of the Singapore restructuring plan; framed assets as trust property. | If the Terms of Service transfer ownership (yield/earn), users might become unsecured creditors in insolvency scenarios. | Some injunctions against exchanges have been dismissed due to specific factual circumstances; relief is determined on a case-by-case basis. | Strong protections regarding property/trust, but final results still rely on the specific details and contractual stipulations. |
The Singapore High Court has issued proprietary and worldwide asset-freezing injunctions regarding stolen cryptocurrency in CLM v CLN, acknowledging NFTs and tokens as property. In Bybit v Ho Kai Xin, it confirmed that cryptocurrency can be legally held in trust. This legal concept is crucial when users allege that an exchange or insider is holding assets on their behalf.
Quoine v B2C2 was among the first cases to address trust concerns in exchange contexts. Subsequent legal actions refined the property analysis, improving customer protections.
The Madras ruling aligns India with other jurisdictions that prioritize property rights over commingled claims when exchanges encounter insolvency or restructuring.
By establishing that cryptocurrency purchases create legally enforceable property interests, instead of simply contractual claims, this decision may restrict how platforms redistribute user assets during periods of financial instability. This also clarifies that local courts maintain jurisdiction over assets that were accessed and funded domestically, regardless of where any corporate restructuring takes place.