A Chinese court has reinforced the legal status of Bitcoin as a form of property after sentencing a man to more than 10 years in prison for stealing 107 BTC from an acquaintance’s wallet.
The case has attracted significant attention because it highlights China’s evolving judicial approach toward cryptocurrency ownership. While the country continues to restrict crypto trading and related financial services, courts are increasingly recognizing Bitcoin’s property rights under criminal law.
The ruling demonstrates that although Bitcoin is not considered legal tender in China, courts may still protect ownership rights when digital assets are stolen.
How the Bitcoin Theft Happened
The incident began in July 2023 when a Bitcoin holder identified as Feng sought help from an acquaintance named Zhang to convert 117 BTC.
According to prosecutors, Zhang had assisted Feng with a previous transaction, which led Feng to trust him with setting up a new digital wallet and helping facilitate the conversion process.
During the setup, Feng wrote down the wallet’s 12-word recovery phrase while Zhang was present.
Investigators later revealed that Zhang memorized:
- Eleven complete recovery words
- The first letter of the twelfth word
Using that information, Zhang later tested possible combinations until he successfully reconstructed the full recovery phrase.
Once access was obtained, he transferred 107 Bitcoin from Feng’s wallet to addresses under his control.
The Importance of Recovery Phrases
The case serves as a reminder of one of the most critical aspects of cryptocurrency security.
A wallet recovery phrase grants complete control over digital assets stored in a self-custody wallet.
Anyone who gains access to that phrase can:
- Restore the wallet
- Access the private keys
- Transfer funds
- Control the assets without additional authorization
The Qingdao case demonstrates how even brief exposure to a recovery phrase can create significant security risks.
Investigators Followed the Blockchain Trail
Feng discovered the missing Bitcoin the following day and immediately sought assistance from a blockchain security company before reporting the theft to authorities.
Police formally opened an investigation in October 2023.
Investigators used a combination of:
- Wallet transaction records
- Blockchain transfer data
- IP address information
- Financial account activity
to trace the movement of the stolen Bitcoin.
The evidence ultimately connected Zhang directly to the unauthorized transfers.
Zhang Claimed It Was a “Protective Takeover”
During the investigation, Zhang admitted moving the Bitcoin but denied committing theft.
Instead, he argued that the transfer was a “protective takeover” intended to safeguard the assets from a potential third-party theft.
He further claimed that he later lost money through speculative trading and had never successfully converted the Bitcoin into cash.
However, prosecutors found evidence that contradicted those statements.
Transaction Records Told a Different Story
Investigators traced the stolen Bitcoin through multiple wallets before identifying proceeds that had been converted into traditional currency.
According to court records:
- More than 660,000 yuan was identified.
- The amount was equivalent to approximately $97,000.
- The proceeds were transferred to a friend’s bank account.
The financial trail significantly weakened Zhang’s defense and helped establish intent to profit from the stolen assets.
Prosecutors Treated Bitcoin as Property
One of the most important aspects of the case involved how prosecutors classified Bitcoin.
The Licang District People’s Procuratorate argued that Bitcoin possesses economic value and grants exclusive control to its owner through private keys and recovery phrases.
According to prosecutors:
Current policies deny virtual currencies legal-tender status, but do not deny their property attributes.
This distinction proved crucial.
Although Bitcoin cannot function as legal currency within China, prosecutors argued that it still meets the legal definition of property and can therefore be the subject of theft under criminal law.
Why the Court’s Reasoning Matters
The prosecution’s argument focused on several key characteristics:
Bitcoin Has Economic Value
Bitcoin can be bought, sold, transferred, and exchanged for value.
Ownership Is Exclusive
Control is determined by possession of private keys and recovery phrases.
Assets Can Be Stolen
Unauthorized access deprives the rightful owner of control.
These features allowed prosecutors to classify Bitcoin as property even without recognizing it as legal tender.
How the Theft Amount Was Calculated
An interesting aspect of the ruling involved valuation.
China currently has no official Bitcoin exchange rate because cryptocurrency trading remains heavily restricted.
To avoid assigning a market value to all 107 BTC, prosecutors used the amount of realized cash proceeds instead.
The court based its calculations on the approximately 660,000 yuan that investigators were able to directly trace.
This approach allowed the court to determine criminal liability without formally valuing Bitcoin itself.
Court Upholds Severe Sentence
The Licang District People’s Court delivered its judgment on April 28, 2025.
The court convicted Zhang of theft and imposed:
- 10 years and 9 months in prison
- A fine of 100,000 yuan
Zhang later appealed the decision.
However, the Qingdao Intermediate People’s Court rejected the appeal and upheld the original sentence on November 10, 2025.
China’s Crypto Policy Remains Unchanged
The ruling does not represent a reversal of China’s broader cryptocurrency restrictions.
Chinese regulators continue to prohibit many forms of:
- Cryptocurrency trading
- Exchange operations
- Crypto-related financial services
Bitcoin still lacks legal-tender status within mainland China.
However, courts increasingly distinguish between banning financial activities and protecting private property rights.
Part of a Larger Legal Trend
The Qingdao case is not an isolated example.
Chinese courts have previously treated Bitcoin and other cryptocurrencies as virtual property in disputes involving:
- Ownership claims
- Asset recovery
- Inheritance matters
- Theft cases
More recently, China’s Supreme People’s Court announced plans to study clearer judicial guidance for virtual-currency disputes.
The goal is to provide more consistency as courts handle an increasing number of crypto-related cases.
What This Means for Crypto Holders
The ruling reinforces an important legal principle: ownership rights can exist even when an asset lacks legal-tender status.
For cryptocurrency holders, the case demonstrates that Chinese courts may continue protecting digital asset ownership despite strict regulations on trading activity.
The decision also offers a powerful security lesson.
Anyone who gains access to a wallet recovery phrase gains complete control over the associated assets.
As self-custody becomes more common globally, protecting recovery phrases remains one of the most important responsibilities for cryptocurrency investors.
Final Thoughts
The 107 BTC theft case highlights China’s increasingly nuanced approach to cryptocurrency.
While regulators continue restricting trading and financial services, courts are showing a willingness to recognize Bitcoin’s property characteristics and punish theft accordingly.
The ruling does not signal broader legalization of cryptocurrency activities. However, it does strengthen legal recognition of crypto ownership rights and provides another example of courts treating Bitcoin as valuable property under criminal law.
For the cryptocurrency industry, the case underscores a growing global trend: governments may disagree on how crypto should be regulated, but many legal systems increasingly recognize that digital assets deserve protection when ownership rights are violated.
