The $230 million cyberattack on WazirX’s multi-signature wallets in July 2024 has emerged as a pivotal catalyst for reshaping India’s legal landscape around virtual digital assets (VDAs). This incident not only exposed vulnerabilities in crypto exchanges but also prompted landmark judicial interventions that prioritize investor protections, fiduciary accountability, and domestic jurisdictional primacy over foreign restructuring schemes. By anchoring VDAs within established principles of trust, property, and equity law, Indian courts have fortified consumer rights while navigating the complexities of cross-border insolvency, signaling a maturing regulatory ecosystem that balances innovation with robust safeguards.
At the heart of this evolution lies the Bombay High Court’s October 2025 decision, which established a stringent fiduciary duty framework for crypto platforms operating in India. Rejecting proposals to “socialize losses” among users, the Court emphasized that exchanges bear non-delegable responsibility for asset custody and risk management. Force majeure clauses, as the judgment clarified, cannot excuse custodial lapses, mandating instead that platforms hold digital assets in trust with strict accountability to users. Repurposing, transferring, or redistributing assets without explicit consent stands prohibited, as courts now pierce beyond contractual forms, whether tripartite or bipartite, to enforce the substance of user agreements under traditional equity, trust, and property principles. This ruling extends familiar protections to VDAs, transforming exchanges from mere service providers into fiduciaries bound by heightened duties.
Building directly on this foundation, the Madras High Court’s parallel October 2025 ruling further solidified these protections by classifying cryptocurrencies as property, even if not legal tender or tangible assets. In addressing frozen XRP tokens on the WazirX platform post-hack, the Court affirmed that VDAs can be possessed, enjoyed, and held in trust, aligning Indian standards with international benchmarks like the EU’s MiCAR and the UK’s FCA regulations on client asset segregation. Drawing support from precedents in England, Singapore, and New Zealand, this proprietary recognition empowers investors with enforceable rights, clarifies exchange liabilities, and integrates VDAs into broader consumer protection frameworks. Moreover, under Section 9 of the Arbitration and Conciliation Act, domestic courts retain jurisdiction for urgent injunctive relief, even in foreign-originated disputes. The Court explicitly declined to endorse asset redistribution via cross-border schemes, underscoring that Indian law safeguards individual holdings against collective loss offsets: a principle that dovetails seamlessly with the Bombay ruling’s rejection of loss socialization.
This judicial synergy, however, collides sharply with Singapore’s restructuring framework for WazirX, sanctioned by its High Court in October 2025 under Zettai Pte Ltd’s oversight. Achieving 95.7% creditor approval, the process introduced Recovery Tokens and stablecoin payouts while partnering with custodian BitGo for enhanced transparency and risk mitigation. Yet, implementing this socialized recovery in India proves untenable, as domestic courts assert primacy over foreign mechanisms that dilute investor rights. Indian jurisprudence refuses to enforce schemes redistributing unconsented assets, prioritizing substantive protections for local holdings and investors. This conflict delineates clear boundaries for virtual asset service providers (VASPs): compliance with India’s fiduciary, property, and consumer standards remains non-negotiable, overriding arbitration or overseas insolvency processes.
These developments carry profound strategic implications for market legitimacy and global investment. By legitimizing VDAs as enforceable property and imposing exchange-level accountability, India fosters a predictable environment that attracts international capital, as evidenced by the recent USD 2.45 billion investment blueprint uniting global players with registered Indian VASPs. Complementary regulatory measures, including the Financial Intelligence Unit of India’s (FIU–IND) enforcement on cybersecurity and fit-and-proper criteria, bolster ecosystem resilience and deter non-compliant actors. From an enforcement standpoint, VDAs now qualify as goods under the Consumer Protection Act, enabling claims in insolvency, injunctive relief to preserve asset values, and potential collateralization for lending, i.e., avenues previously inaccessible.
In essence, this convergence of judicial recognition, regulatory enforcement, and business momentum lays a robust foundation for regulatory clarity in India’s digital asset space. While comprehensive legislation remains essential to codify these rights and obligations, the current framework rooted in fiduciary duties, proprietary entitlements, and jurisdictional sovereignty assures investor confidence, practical protections, and operational growth. For exchanges, investors, and stakeholders, these shifts not only mitigate cross-border risks but also position India as a mature, compliant hub in the global VDA sector, catalyzing sustained international engagement.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
