CHENNAI / LONDON (IT BOLTWISE) – A landmark ruling from India’s Madras High Court could change the way cryptocurrencies are treated in insolvency proceedings. The court ruled that cryptocurrencies are considered property and not speculative investments, which could have far-reaching implications for how crypto exchanges handle user assets.
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A significant ruling by the Madras High Court in India has fundamentally changed the legal treatment of cryptocurrencies. The court ruled that cryptocurrencies are considered property and not speculative investments. This decision could have far-reaching implications for how crypto exchanges handle user assets, particularly in bankruptcy proceedings. The case involved Indian crypto exchange WazirX, which was prevented from redistributing a customer’s XRP holdings without their consent.
Justice N Anand Venkatesh clarified that cryptocurrencies are considered virtual digital property under Indian law and are not classified as speculative transactions. This decision is based on Section 2(47A) of the Income Tax Act, which regulates virtual digital assets. The court emphasized that cryptocurrencies can be held in a fiduciary form, which further strengthens their recognition as property.
WazirX argued that the platform does not own any crypto wallets and that all users would be compensated under a restructuring plan overseen by a Singapore court. However, the court pointed out that the plaintiff had transferred her funds from India and used the platform from there, giving rise to the jurisdiction of the Madras High Court.
This ruling could serve as a precedent not only in India but also in other jurisdictions by strengthening the rights of crypto holders and restricting the redistribution of assets during financial difficulties. It highlights the importance of ownership rights over pooling schemes and could fundamentally change the way platforms manage user bases during financial distress.
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