Recently, the Madras High Court has ruled that cryptocurrency qualifies as “property” under Indian law, an asset that can be owned, enjoyed, transferred, and held in trust.

What is Cryptocurrency ?

• Cryptocurrency is a digital medium of exchange that uses cryptography (encryption techniques) to verify transactions and algorithms to regulate supply.
• It operates on Blockchain technology, which is a decentralized digital ledger that records transactions across a peer-to-peer network without a central authority. 
• It is not issued or regulated by a central authority like a government or central bank.
• Eg: Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE) etc.

Legal & Regulatory Context in India

• Under Section 2(47A) of the Income Tax Act, 1961, cryptocurrency is classified as a “Virtual Digital Asset (VDA)”.
• Taxed under Section 115BBH (30% on income from transfer/sale).
• 1% TDS on transfers under Section 194S.
• Not recognized as legal tender in India (RBI stance).

Court’s Recognition of Cryptocurrency as Property

• Judicial Observation: The Court held that cryptocurrency is not tangible property nor currency but is property capable of being enjoyed and possessed beneficially and held in trust.
• Statutory Basis: The Court referred to Section 2(47A) of the Income Tax Act, 1961, which defines cryptocurrency as a virtual digital asset (VDA).
• Functional Nature: Cryptocurrencies can be stored, traded, and sold, thus possessing characteristics of property.
• Global Perspective: The judgment referenced positions in the UK, USA, Singapore, and New Zealand, where cryptocurrencies are recognised as property-like assets that can be possessed and transferred.
• Trust Principle: The Court observed that virtual digital assets held electronically are meant to be held in trust, establishing a fiduciary duty by exchanges toward users.

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Significance of the Judgement

• Legal Recognition: Cryptocurrency is now judicially recognised in India as a form of property, capable of ownership, transfer, and trust.
• Property Definition Expanded: Reinforces that property includes every species of valuable rights and interests having exchangeable value.
• Clarification under Tax Law: Confirms that crypto qualifies as a Virtual Digital Asset under the Income Tax Act.
• Investor Protection: Affirms that crypto assets held by users deserve the same legal protection as other property forms, strengthening confidence in digital asset holdings.
• Fiduciary Accountability: Sends a strong message to exchanges that they owe fiduciary duties to users whose assets they hold, even amid foreign legal proceedings.

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