The Madras High Court has begun hearing a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, against WazirX, one of India’s leading cryptocurrency exchanges.

The plea seeks interim relief and protection of assets amid a contractual dispute between the parties.

The dispute originated from a petition filed by a retail investor who had purchased 3,532.3 XRP tokens worth ₹1,98,516 in January 2024. The investor alleged discrepancies in trade execution and sought court intervention to safeguard funds pending arbitration.

This marks a significant legal turning point in India crypto landscape — potentially shaping how arbitration laws apply to crypto asset disputes and how investor protection is interpreted under existing financial frameworks.

Following WazirX massive security breach in July 2024, which targeted its Ethereum and ERC-20 token cold wallets, the exchange froze all user accounts, including those unrelated to the hack.

When WazirX later proposed a “socialization of losses” plan — redistributing unaffected users’ assets to cover hack-related damages — the investor sought legal intervention.

The Madras High Court rejected WazirX proposal outright, ruling that:

• The XRP tokens in question were unaffected by the hack.

• WazirX attempt to redistribute them violated property and trust principles.

• Crypto assets deposited by users are their legal property, not jointly owned with the exchange.

WazirX model of ‘damage socialization’ is akin to spontaneous group insurance,” Justice Venkatesh wrote:

“A weak argument devoid of legal foundation.”

Justice Venkatesh 54-page judgment meticulously analyzed the legal nature of cryptocurrencies under Indian and international law.

➡️ Crypto = Property:

Though intangible, cryptocurrencies are definable, identifiable, transferable, and capable of exclusive control through private keys — all characteristics of property.

➡️ Trust Custody:

Exchanges act as custodians and hold client assets in trust, not ownership.

➡️ Precedents Cited:

  • Ruscoe v. Cryptopia Ltd (New Zealand) — Cryptocurrencies held on trust for exchange users.

  • AA v. Persons Unknown (UK) — Crypto recognized as property capable of trust and injunctions.

➡️ Indian Law References:

  • Section 2(47A) of the Income Tax Act, 1961 — classifies cryptocurrencies as Virtual Digital Assets (VDAs).

  • Ahmed GH Ariff v. CWT and Jilubhai Nanbhai Khachar v. State of Gujarat, expanding the definition of “property” under Indian jurisprudence.

The court concluded that crypto assets are valuable rights and interests, and their legal protection extends beyond speculative treatment.

🪙 Broader Implications for Indian Crypto Holders

The ruling sets a powerful precedent for the Indian crypto industry:

✅ Cryptocurrency legally recognized as property under Indian law.

✅ User assets on exchanges remain their sole ownership, even during insolvency or hacks.

✅ Exchanges act as custodians, not owners of user funds.

✅ Domestic consumer protection strengthened for millions of Indian traders.

Legal experts hailed the decision as a de facto recognition of crypto ownership rights — potentially paving the way for broader regulations treating digital assets like gold or real estate.

“This is the strongest judicial acknowledgment yet of crypto as private property in India,”

said legal analyst Ramesh Datar.

“It sets a template for future financial and regulatory frameworks.”

🔗 Jurisdictional Questions and International Context

WazirX argued that its Singapore-approved restructuring plan should automatically apply to Indian users, given the exchange’s offshore arbitration seat.

However, the Madras High Court rejected this argument, citing the Supreme Court’s ruling in PASL Wind Solutions Pvt Ltd v. GE Power Conversion India Pvt Ltd (2021) — which permits Indian courts to exercise interim jurisdiction under Section 9 of the Arbitration and Conciliation Act if domestic assets are at stake.

This ensures Indian investors remain protected, even when an exchange’s parent company operates under foreign jurisdiction.

Coincidentally, the ruling arrived just as WazirX resumed operations after more than a year-long suspension.

• 95.7% of creditors had approved its recovery plan.

• However, only ~30% of user funds have been returned so far due to f frozen accounts and delayed KYC verification.

• The platform relaunched with zero-fee trading and a phased trading restoration process.

The verdict timing reinforced the message: user ownership supersedes exchange recovery plans, emphasizing investor protection as the cornerstone of India’s crypto evolution.

• Cryptocurrencies are legal to own and trade, but not legal tender.

• India applies a 30% tax on digital asset gains and 1% TDS on transfers.

• A comprehensive regulatory framework is still pending, though the government recognizes Virtual Digital Assets under income tax laws.

• The Madras ruling provides judicial clarity in the absence of legislative certainty — setting a model for future regulation.

🧠 Final Take: A Turning Point for India’s Digital Future

The Madras High Court verdict is more than a courtroom victory — it’s a paradigm shift in how India views digital assets.

It elevates crypto from speculative instrument to legally protected private property, offering both investor security and regulatory direction.

For a country with over 115 million crypto users, this ruling could accelerate the transition toward a regulated, rights-based digital asset economy.

👑 India may not yet recognize Bitcoin as money — but it now recognizes it as yours.

#IndiaCrypto #WazirX #CryptoLaw #CryptoRegulation #DigitalAssets
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