Syllabus:
GS-3: Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.
Context: A recent Madras High Court ruling has classified cryptocurrencies as ‘property’ in India, moving them beyond speculative assets to legally protected holdings.
More on the News
- In delivering the order, the Court drew support from Supreme Court’s verdicts given in Ahmed G.H. Ariff vs CWT and Jilubhai Nanbhai Khachar vs State of Gujarat cases to expand the meaning of “property” under Indian law.
Key Highlights of the Ruling
- Recognition as Property: The Court explicitly held that cryptocurrencies are capable of being owned, enjoyed, and held in trust. Although not tangible assets nor traditional currencies, they possess the capacity for ownership and benefit, akin to property.
- Custodial Responsibility: The Court emphasized that exchanges hold customer assets ‘in trust,’ which imposes higher accountability and governance standards on the platforms, further legitimizing cryptos as enforceable rights.
- Alignment with Legal Frameworks: The judgment anchors blockchain within India’s existing property and fiduciary law frameworks, transforming cryptocurrencies from speculative assets to enforceable legal holdings.
- Cryptocurrency falls within the definition of a “virtual digital asset” under Section 2(47A) of the Income Tax Act, 1961.
Significance of the Judgement
- Tax and Investment Recognition: The ruling could accelerate the formal recognition of cryptocurrency as a legitimate investment class within Indian financial regulation, especially in the context of Indian Income Tax provisions.
- Need for Evolving Legal Frameworks: While the judiciary’s recognition marks progress, there is need for more concrete laws to fully embed the intangible and emergent nature of cryptocurrencies into India’s legal and tax system.
Regulatory Opportunities: The Court’s acknowledgment of the challenges in fitting new technological concepts into existing legal frameworks signals an openness to evolving laws that foster innovation while ensuring financial stability and consumer protection.