Is Cryptocurrency a Property Capable of Being Held in Trust?
The Madras High Court[1] recently analysed the question of whether cryptocurrency can be considered property capable of being held in trust. The issue arose in the context of a cyberattack on the WazirX platform operated by Zanmai Labs Private Limited. The cyberattack resulted in the freezing of user holdings, including bitcoins and other crypto assets. Following this incident, the platform began exploring a reorganisation exercise that involved the potential movement or restructuring of users’ crypto holdings. In response to these developments, the petitioner, i.e. Ms. Rhutikumari, approached the Court seeking interim protection, specifically, that Zanmai Labs be restrained from redistributing or reallocating her XRP token holdings as part of the proposed reorganisation process. The primary concern was to ensure that the assets remained preserved pending resolution of the dispute.
Zanmai Labs opposed the petition on jurisdictional grounds, that the Madras High Court lacked jurisdiction because the agreement governing the relationship between the parties contained an arbitration clause providing for seat of arbitration as Singapore. According to Zanmai Labs, the reorganisation process was already being supervised by courts in Singapore, and therefore any disputes between the parties were subject to arbitration seated in Singapore, with Singaporean procedural law governing the arbitration. On this basis, Zanmai Labs contended that the jurisdiction of Indian courts was excluded and that no interim relief could be granted under Section 9 of the Arbitration and Conciliation Act, 1996.
The Court rejected this contention. It clarified that the authority of Indian courts to grant interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 is not automatically excluded merely because the seat of arbitration is outside India.[2] The Court observed that several factors established a significant nexus with India. In particular, the petitioner had accessed the platform from India and had transferred funds through an Indian bank account. These circumstances indicated that at least a part of the cause of action had arisen within India. On this basis, the Court held that Indian courts could exercise jurisdiction to grant interim protection. The decision therefore reaffirms that parties may approach Indian courts for urgent interim relief where there exists a substantial connection with India, even if the substantive arbitration proceedings are to take place in a foreign jurisdiction, as in this case in Singapore.
It is a significant ruling highlighting that parties do not need to rely exclusively on remedies available at the foreign arbitral seat. It reiterates the principles recognised by the Supreme Court of India[3] that, where a dispute has a meaningful connection with India, parties may seek preservation orders, injunctions, or other asset-protection measures before Indian courts. While resolving the dispute, the Court also addressed a broader and long-standing question in Indian law: the legal nature of cryptocurrencies themselves.
In the course of the order, Justice N. Anand Venkatesh observed that cryptocurrency constitutes “property capable of being held in trust.” The Court noted that although cryptocurrency is neither physical property nor conventional money, it possesses characteristics that allow a holder to exercise control,[4] enjoy its value,[5] and deal with it as an asset. The Court recognises digital tokens as “virtual digital assets”[6] and observed that this legislative classification reflects the practical reality that such assets carry economic value and possess proprietary characteristics.
This observation has significant implications. If cryptocurrency can be regarded as property capable of being held in trust, courts may apply traditional equitable remedies to protect investor rights. These include doctrines relating to trust creation, fiduciary obligations, tracing, and constructive trusts. In practical terms, this enables courts to issue directions to custodians or intermediaries, grant injunctions, and order the preservation of digital assets in disputes involving cryptocurrencies. There is a further need to answer the questions concerning the legal character of cryptocurrencies by larger benches or appellate courts, particularly in contexts involving decentralised custody structures, offshore wallets, non-fungible tokens (NFTs), or insolvency proceedings.
Nevertheless, the ruling establishes an important doctrinal bridge between traditional property law principles and emerging digital asset technologies. The Madras High Court has made a major contribution to the growth of India's developing digital asset law by acknowledging the potential to treat cryptocurrencies as trust property and confirming the availability of interim relief in cross-border disputes.
References
[1] Rhutikumari v. Zanmai Labs Private Limited
[2] PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited, AIRONLINE (2021) SC 213.
[3] Bhatia International v. Bulk Trading SA, 2 002 (4) SCC 105.
[4] Jilubhai Nanbhai Khachar v. State of Gujarat, (1995) Supp 1 SCC 596.
[5] Internet and Mobile Association of India v. RBI, (2020) 10 SCC 274.
[6] Section 2(47A) of the Income-tax Act, 1961.