THE DEVIL IN CRYPTO DETAILS

With cryptocurrency exchanges failing in various jurisdictions, owners of digital assets like bitcoin and ethereum must know what happens next. The Madras High Court's recent judgement in Rhutikumari highlighted a divergence in the emerging jurisprudence on such cases. Users must read the fine print

- SRIRAM VENKATAVARADAN ANIRUDH KRISHNAN

HE global cryptocurrency market operates on a fragile foundation of faith. Investors pour billions of dollars into digital exchanges, assuming that the bitcoin or ethereum they see on their screen actually belongs to them. They believe that the exchange is merely a digital vault, a custodian that holds their assets for safekeeping. But what happens if that company fails? Or if the vault is breached?

The Madras High Court's recent judgement in Rhutikumari vs Zanmai Labs has brought these terrifying questions to the fore. In a significant ruling involving a cyber-attack on the platform of WazirX, a trading app, the court challenged the fatalistic view that investors are helpless. When the court observed that the virtual digital assets are 'meant to be held in trust with a fiduciary duty owed to their owners', it did much more than resolve an investor-promoter dispute.

The judgement is best understood as part of a broader global conversation about what happens when crypto platforms fail. The central legal inquiry that the courts are wrestling with is: whether the relationship between a cryptocurrency exchange and its user is fiduciary in nature, thereby creating a 'trust', or whether it is merely contractual in nature, thereby creating a 'debt'? This distinction is not just a matter of semantics but of asset survival.