First, it is only an idea that I don't know how to resolve all the problems with it.
What I thought of is to block the address of the thief, that way he won't be able to pay anyone so there is no problem with confiscating money from uninvolved party.
[...]
As I wrote before, now someone needs to find a way to prove that it is really a theft.
This makes no sense.
Again, cash is cash is cash.
If you appoint some "higher authority" to decide that some cash is no longer cash, the whole currency becomes worthless.
Again, this is not a problem that has yet to be solved, this is a problem that
cannot be solved.
It is not a problem with no known solution, it is a problem which
is known to have no solution.