WazirX bans the use of Ripple’s XRP to cover platform losses: here’s why

The court affirmed that users’ XRP remains their property, reinforcing that the cryptocurrency is legally recognized as a protected asset.

An Indian court has stopped cryptocurrency exchange WazirX from reallocating a user’s XRP to cover the platform’s losses. The Madras High Court granted “interim protection,” stating that the user’s digital assets remain his or her exclusive property under Indian law. The ruling marks a key moment in the evolution of the country’s crypto jurisprudence.

The case arises from WazirX’s plan to apply a “loss socialization” model after a $235 million exploit in July 2024. The exchange proposed to distribute losses among all users, including those who held cryptocurrencies unrelated to the stolen ERC-20 tokens.

Court defends cryptocurrency property rights

Justice N. Anand Venkatesh ruled that the loss sharing approach should not affect the XRP holder. The user’s 3,532 tokens, valued at around $9,400, were acquired long before the hack. The judge held that XRP and ERC-20 assets are separate in nature and cannot be pooled for recovery purposes.

The court further clarified that the user’s XRP remains their property and cannot be diluted to compensate for the exchange’s operational failures. In doing so, it reaffirmed that cryptocurrencies qualify as a form of property that can be owned and protected under current law.

To enforce this ruling, the ruling also invoked the Arbitration and Conciliation Law, guaranteeing that the user receives legal guarantees until the arbitration procedure is concluded. WazirX must deposit 956,000 rupees (around $11,500) in escrow or provide a bank guarantee for the same amount as interim protection.

WazirX resumes amid key legal changes

The Madras High Court’s decision comes as WazirX seeks to rebuild its operations following the prolonged suspension arising from the 2024 breach. The platform resumed operations last week after the Singapore High Court approved its restructuring plan, with the support of nearly 95.7% of participating creditors.

WazirX previously attributed the exploit to North Korea’s Lazarus Group, which exploited a weakness in its multi-signature wallet setup. The hack forced the exchange offline for 16 months, sparking widespread debate over liability and asset security in the Indian crypto market.

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In this context, legal observers see the latest ruling as a sign that Indian courts are beginning to recognize digital assets as protected property. The case proceeds to a Bombay High Court decision rejecting similar loss-sharing measures by Bitcipher Labs. Notably, these developments could shape future disputes as India moves towards clearer crypto regulations.