Madras High Court grants interim protection to user, setting a key precedent for digital asset ownership in India
In a landmark ruling for India’s digital asset market, the Madras High Court has determined that cryptocurrency constitutes property, barring crypto exchange WazirX from reallocating customer-held assets to offset losses from its $230 million hack in 2024. The decision marks a pivotal step in defining ownership rights and legal protections for crypto users in India’s evolving regulatory landscape.
Justice N. Anand Venkatesh ruled on Saturday that WazirX cannot redistribute a user’s 3,532 XRP holdings (worth approximately $9,400) as part of its “socialization of losses” strategy. The exchange had proposed spreading losses from the July 2024 exploit across all user accounts, even those unrelated to the affected assets.
However, the judge concluded that the stolen crypto were ERC-20 tokens, while the customer’s assets were XRP, making them “completely different cryptocurrencies.” The ruling prevents WazirX from diluting user assets to compensate for its operational failures.
Crypto Recognized as Property
The High Court’s decision rested on a key principle: digital assets are property capable of ownership and possession. Justice Venkatesh stated that the user’s XRP, purchased well before the hack, remained their rightful property and could not be reallocated without consent.
The court observed that WazirX’s proposal would have violated basic property and contractual rights, adding that the platform must respect user custody of digital assets. The user was granted “interim protection” under the Arbitration and Conciliation Act, ensuring their holdings remain secure until the arbitration process concludes.
The court directed WazirX to either provide a bank guarantee of ₹956,000 (around $11,500) or deposit the same amount into an escrow account as interim protection for the affected user. The measure is intended to secure the user’s claim while legal proceedings continue.
Background: WazirX Hack and Recovery
The $230 million breach in July 2024 forced WazirX to suspend operations for 16 months. Investigations later linked the exploit to North Korea’s Lazarus Group, which exploited vulnerabilities in the exchange’s multi-signature wallet system.
Earlier this month, Singapore’s High Court approved WazirX’s restructuring plan, supported by nearly 96% of its creditors, allowing the exchange to resume limited operations.
The Madras High Court’s ruling sets a powerful legal precedent for crypto ownership rights in India, reinforcing that digital assets are legally protected property. Legal experts say the decision could shape future regulatory frameworks, providing greater investor confidence and establishing clearer custodial accountability for crypto exchanges operating within the country.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.