A court in Qingdao, China, has upheld a theft conviction involving 107 Bitcoin, effectively accepting prosecutors’ argument that BTC can qualify as criminal-law property even though it is not legal tender in the country. The case, detailed in a summary published by the Supreme People’s Procuratorate, shows how Chinese authorities can protect crypto holdings under theft law while maintaining restrictions on crypto trading and financial services.
The dispute centered on a wallet recovery phrase and a trust-based transaction between acquaintances. Prosecutors said a man identified as Zhang helped a Bitcoin holder, Feng, set up a new digital wallet in July 2023, then secretly memorized 11 of the 12 recovery words and the first letter of the final word while Feng wrote them down. That partial seed phrase became enough for Zhang to later test combinations and take control of the wallet.
Recovery Phrase Becomes the Key Evidence
According to the official case summary, Feng held 117 Bitcoin and had asked Zhang to assist with a planned transaction after Zhang had previously helped him complete another Bitcoin deal. During the wallet setup, Zhang warned Feng that the mnemonic phrase was critical, while allegedly watching closely enough to memorize nearly all of it. The case turned on the practical reality that control of the recovery phrase meant control of the wallet assets.
Zhang later used the memorized words to unlock Feng’s digital wallet and transfer 107 BTC. When questioned, he claimed the transfer was a “protective takeover” meant to prevent the assets from being stolen by others, but investigators rejected that explanation after reviewing wallet records, transaction paths and linked IP data. The evidence showed the Bitcoin was moved through multiple wallet addresses and ultimately converted into cash proceeds.
The recovered financial trail became important for sentencing. Because China has no official Bitcoin exchange rate for judicial valuation, prosecutors used the realized cash proceeds from the converted assets to calculate the theft amount. The summary said more than 660,000 yuan was traced into a friend’s bank account, making the cash-out value the practical basis for criminal measurement.
Property Status Does Not Mean Legal Tender
The legal issue was not whether Bitcoin is money in China. Prosecutors argued that BTC still has economic value and can be exclusively controlled through private keys and mnemonic phrases, making it capable of being treated as property under criminal law. That distinction allowed the court to punish the unauthorized transfer as theft without recognizing Bitcoin as legal currency.
The Licang District People’s Court convicted Zhang of theft on April 28, 2025, sentencing him to 10 years and nine months in prison and imposing a 100,000-yuan fine. Zhang appealed, but the Qingdao Intermediate People’s Court rejected the appeal on Nov. 10, 2025, leaving the original conviction and sentence in place.
The case does not soften China’s broader restrictions on cryptocurrency trading, exchange activity or related financial services. The procuratorate’s summary made clear that current policy still denies virtual currencies legal-tender status, while also stating that this does not erase their property characteristics in criminal cases. The result is a narrow legal pathway: crypto may be restricted as financial infrastructure but still protected as property when stolen.
For crypto holders, the case also reinforces a basic custody lesson. A recovery phrase is not a password hint or backup note; it is the asset-control layer itself. Once Zhang observed enough of Feng’s mnemonic phrase, the wallet’s security was effectively compromised before any on-chain transfer occurred.
The broader takeaway is procedural rather than regulatory. Chinese courts are not endorsing Bitcoin trading through this case, but they are showing that unauthorized control over crypto assets can fall within theft law when prosecutors can prove economic value, exclusive control and a traceable conversion path. Bitcoin remains outside China’s monetary system, yet inside the scope of criminal-property protection when misappropriated.