China Recognizes Bitcoin as Property in Major Crypto Theft Case

A court in eastern China has sentenced a man to more than 10 years in prison after he allegedly stole 107 Bitcoin by memorizing most of a victim’s wallet recovery phrase, in a case that is drawing attention for its legal treatment of Bitcoin as protected property under Chinese criminal law.

The Licang District People’s Court in Qingdao sentenced the defendant, identified by local authorities as Zhang, to 10 years and nine months behind bars and imposed a fine of 100,000 yuan (approximately $14,700).

According to a case summary published through the official WeChat account of China’s Supreme People’s Procuratorate, the court found that Zhang unlawfully gained access to a Bitcoin wallet belonging to an acquaintance and later liquidated part of the stolen assets, according to Cointelegraph.

Theft Allegedly Began During Wallet Setup

The incident dates back to July 2023, when a man identified as Feng reportedly asked Zhang for assistance in converting 117 Bitcoin into cash.

During the wallet setup process, Feng wrote down the wallet’s 12-word recovery phrase, commonly known as a seed phrase, which provides full access to a cryptocurrency wallet.

Authorities said Zhang managed to memorize 11 of the 12 words during the process and later reconstructed the remaining word, allowing him to regain access to the wallet independently.

Investigators alleged that Zhang subsequently transferred 107 Bitcoin from the wallet without authorization.

At the time of the theft, the Bitcoin holdings represented a substantial amount, while prosecutors later stated that Zhang converted part of the assets and generated proceeds exceeding $97,000.

Court Treats Bitcoin as Protected Property

The case is notable because Chinese prosecutors reportedly argued that Bitcoin qualifies as “property” under existing criminal law, despite the country maintaining strict restrictions on cryptocurrency trading and mining activities.

China has implemented multiple crackdowns on the crypto industry over recent years, including bans targeting domestic crypto exchanges, mining operations, and various digital asset transactions.

However, the court’s handling of the case suggests that while cryptocurrencies may face regulatory restrictions, digital assets can still receive legal protection in theft-related disputes.

This distinction continues to shape legal debates in China, where authorities have historically differentiated between banning speculative crypto activity and recognizing digital assets as possessing economic value.

Electronic Evidence Linked Transactions to the Suspect

After discovering the missing Bitcoin, Feng reported the incident to authorities, triggering an investigation that traced the transactions back to Zhang.

According to prosecutors, electronic transaction records and blockchain-related evidence played a central role in connecting the wallet transfers to the suspect.

Zhang reportedly admitted to transferring the Bitcoin but claimed he had only intended to “protect” the assets rather than steal them.

He also argued that he did not ultimately profit from the transfers because he later suffered losses while speculating on Bitcoin’s price movements.

Prosecutors rejected that explanation, stating that financial records showed realized proceeds from the transactions.

Case Highlights Human Risks in Crypto Security

The incident has also reignited discussions around crypto wallet security and the vulnerabilities associated with seed phrases.

Industry experts noted that the case was not the result of a technical hack or weakness in Bitcoin’s cryptography, but rather a human security failure tied to physical exposure of wallet credentials.

Alvin Kan, Chief Operating Officer at Bitget Wallet, said the case illustrates how social engineering and trusted-access scenarios remain among the biggest risks facing crypto users.

While 12-word seed phrases are considered computationally secure against brute-force attacks, Kan argued that 24-word recovery phrases provide an even stronger layer of protection and could eventually become more widely adopted across the industry.

He also noted that users often underestimate the risks involved when setting up wallets around other people, even trusted acquaintances, emphasizing that brief visibility of a recovery phrase can still compromise wallet security.

Growing Legal Recognition of Digital Assets

The ruling adds to a growing number of cases globally where courts are increasingly recognizing cryptocurrencies as forms of property that can be stolen, seized, inherited, or protected under existing legal frameworks.

As digital assets continue to integrate into mainstream finance, legal systems worldwide are gradually being forced to address the complex intersection between crypto regulation, ownership rights, and criminal liability.

The Qingdao case highlights how even jurisdictions with restrictive crypto policies may still acknowledge the economic and legal value of digital assets when resolving disputes involving theft and financial harm.