Cryptocurrency as Property and Trust

**Isharth Kumar and Priyanshu Danu

In a recent and widely discussed development in Indian crypto jurisprudence, the Madras High Court, by its judgment dated 1 August 2025, delivered a landmark ruling in Rhutikumari v. Zanmai Labs Pvt. Ltd. (O.A. No. 194 of 2025), unequivocally recognizing cryptocurrencies as property under Indian law. The decision has quickly emerged as a focal point of debate among legal practitioners, regulators, and the digital asset industry alike.

After purchasing 3,532.30 XRP tokens on WazirX, Rhutikumari approached the Madras High Court for interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 following a July 2024 cyberattack that froze withdrawals. Despite a Singapore-seated SIAC arbitration clause, the Court restrained Zanmai Labs Pvt. Ltd. from dealing with her XRP holdings, holding that the tokens constituted the petitioner’s property, were capable of being held in trust, and attracted fiduciary duties on the exchange marking.

The High Court framed the issue: whether the applicant’s crypto holdings could be treated separately (as her “property”) rather than being aggregated for loss-sharing. Crucially, the Court held that the XRP tokens held on WazirX constitute property in India, intangible but proprietary rights – and that Zanmai, as custodian/exchange, owed fiduciary duties in respect of them. The blog therefore analyses the judgment of the Hon’ble Madras High Court in Rhutikumari v. Zanmai Labs and examines its implications in recognizing cryptocurrency as property under Indian law.

Definition of Property under Indian Law

The Court began by surveying prior Indian jurisprudence on “property.” It noted that in Ahmed G.H. Ariff v. CWT (1964) the Supreme Court had declared that “property” is a term of “the widest import,” signifying “every possible interest which a person can clearly hold or enjoy”. Likewise, in Jilubhai Nanbhai Khachar v. State of Gujarat (AIR 1995 SC 142) the Supreme Court defined property broadly to include “everything which is subject of ownership, corporeal or incorporeal, tangible or intangible… everything that has an exchangeable value or which goes to make up wealth”. Applying these expansive definitions, the court reasoned that there can be no doubt that cryptocurrency falls within “property.” Crypto tokens, while intangible (not physical) and not legal tender, are identifiable, transferable and have economic value fitting squarely within the constitutional concept of property.

The Court emphasized that Indian tax law already treats crypto as a “virtual digital asset” (VDA) under Section 2(47A) of the Income Tax Act, 1961, meaning it is not mere speculation but recognized property that can be stored, traded, and sold. In other words, once an investor converts rupees into XRP, those tokens represent a real asset interest that fluctuates in value. This parallels prior observations by the Bombay High Court in Zanmai Labs v. Bitcipher Labs (2025), a related WazirX case that cryptocurrencies held electronically by an exchange constitute assets held in trust for the user.

In summation, the court declared emphatically: “Crypto currency is a property. It is not a tangible property nor is it a currency. However, it is a property… which is capable of being held in trust.”. Thus, Indian law will now protect cryptocurrencies like other valuable rights, they can be owned, alienated, and protected through trust or injunction doctrines.

International Jurisprudence

The Madras Court aligned itself with growing global precedent. In Ruscoe v. Cryptopia (2020), the New Zealand High Court confronted a crypto exchange liquidation. It held that cryptocurrency is intangible property that “is a type of property and it is capable of being held on trust”. Similarly, in AA v. Persons Unknown (UK, 2019), the English Commercial Court found that bitcoin is property. There the insurer paid ransom in BTC and sought recovery; Mr. Justice Bryan granted a proprietary injunction, observing “Bitcoin were property and could be subject to claims…in restitution and/or constructive trust.”. These cases echo the UK Jurisdiction Taskforce’s view (2019) that crypto assets qualify as property in principle.

Internationally, courts have increasingly characterized crypto tokens as property capable of ownership and trust. The Madras HC noted that property being of the “widest import” readily accommodates crypto as a valuable species of property. In effect, the court accepted that tokens, though “only a series of 1s and 0s,” have the defining characteristics of property: they are identifiable, definable, transferrable, and under the exclusive control of the holder.

Custodial Relations and Fiduciary Duties

Having recognized crypto as property, the Court turned to the relationship between the exchange and its users. It observed that the user agreement and platform architecture treated the Indian entity (Zanmai Labs) as the custodian of each user’s crypto wallet. Under Clause 6 of the WazirX terms, Zanmai enabled rupee–crypto trades on a non‑P2P basis and even acted as the user’s agent in rupee transfers. Importantly, Zanmai was registered as a “reporting entity” under Section 2(1)(wa) of Prevention of Money Laundering Act, 2002, meaning only it (not the foreign parent) was licensed to operate the exchange in India.

Given these facts, the court held Zanmai liable as custodian. It affirmed that VDAs (crypto tokens) entrusted to an exchange are held in trust with a fiduciary duty to the owner and crypto exchanges hold VDAs in trust and have a fiduciary duty to the owners of such asset. In practical terms, Zanmai cannot assert that it passed the tokens to another entity without the user’s consent, hence, the court made clear that once assets are held in custody under an agreement, the custodian is accountable for them.

Consequently, the petitioner’s XRP coins which were stored on Zanmai’s platform and untouched by the hack remained her separate property. The court rejected Zanmai’s argument that all assets should be pooled and losses socialized. It concluded that only the tokens stolen (ERC-20 coins in the hack) could be subject to loss-sharing; the petitioner’s XRP (in a separate wallet) could not lawfully be haircut to cover others’ losses.

In its interim relief the Court echoed this reasoning. It ordered Zanmai to preserve the petitioner’s XRP holdings intact, and to furnish a bank guarantee (or escrow deposit) of about Rs. 9.56 lakh (the current value of the XRP) to secure those holdings.

Legal Remedies and Protection for Investors

The recognition of crypto as property radically expands the legal remedies available to Indian investors. Cryptocurrencies can now be the subject of proprietary injunctions and restitution claims under the Specific Relief Act, 1963. The Court’s grant of interim relief underscores that it treats the user’s crypto portfolio as sacrosanct property, not merely an unsecured account balance.

Additionally, users can invoke criminal and civil laws for theft or misappropriation of tokens. If a hacker steals private keys, victims can seek recovery of property (via tracing orders) rather than suing only for breach of contract. Indeed, by declaring crypto to be property the judiciary “has built the legal foundation” for remedies long avoided by lawmakers.

For insolvency situations, this ruling also offers protection. If an exchange collapses under the Insolvency and Bankruptcy Code, 2016 user tokens identified as held in trust should fall outside the estate of the failed company. In other words, crypto holdings may not have to be pro-rata distributed to creditors but instead returned to rightful owners. This contrasts with cases like FTX or Mt. Gox, where customer crypto was largely commingled and treated as unsecured claims. 

On the regulatory front, the Court’s decision highlights India’s current ambivalence. The government taxes VDAs with a 30% capital-gains rate and 1% TDS and subjects exchanges to AML/KYC rules like FIU-India registration and PMLA reporting, yet has not enacted a comprehensive crypto law. The Court’s ruling may prompt regulators to clarify their stance. 

Future Outlook

This ruling sends a clear message for India’s crypto future. Courts have stepped into a regulatory vacuum, affirming that crypto assets are legally protectable property and that exchanges operate as custodial trustees. It is likely to spur legislative and regulatory action. Lawmakers may now feel compelled to enshrine crypto’s property status and impose formal custodial regulations e.g. licensing requirements, capital/segregation norms. Tax and AML statutes already treat VDAs as valuable assets; future reforms might integrate crypto under securities or commodity laws, or even a dedicated legislation to regulate cryptocurrency.

For the judiciary, Rhutikumari is a precedent to safeguard investor assets. Indian courts now have a framework for petitions over digital tokens and can grant proprietary injunctions. The judgment also illustrates that elaborate arbitration clauses or offshore schemes will not automatically override domestic property rights.

In summary, the Madras HC has closed an interpretive gap: cryptocurrencies in India are no longer nebulous objects, but recognized property interests. Going forward, this decision should encourage better investor protection, more prudent exchange governance, and, ultimately, a clearer regulatory framework for India’s burgeoning crypto market.

**Isharth Kumar is a fourth-year B.Sc. LL.B. (Hons.) student at the National Law Institute University, Bhopal. His primary areas of interest include Intellectual Property Rights, Data Protection, and Media Law.

**Priyanshu Danu is a fourth-year B.Sc. LL.B. (Hons.) student at the National Law Institute University, Bhopal. His academic interests lie in Arbitration Law, the Digital Personal Data Protection regime, and Media Law.

Disclaimer: The views expressed in this blog do not necessarily align with the views of the Vidhi Centre for Legal Policy.