Chinese chemical producers are reportedly accepting cryptocurrency as payment for fentanyl ingredients that they sell to drug organizations globally. A recent report by crypto analytics platform Elliptic has identified over 90 Chinese chemical companies that advertised their fentanyl precursor chemicals on the open web, with 90% of them offering to accept payments in cryptocurrencies like Bitcoin (BTC) and Tether (USDT).
Despite fentanyl being banned in China since 2019, many of these businesses were also willing to supply the drug itself. The report revealed that most of the Chinese labs providing fentanyl ingredients used accounts at “three specific exchanges” that are based outside of China. The report did not disclose the names of these exchanges.
Elliptic analyzed the cryptocurrency wallets used by these companies and found that they have received over $27 million in payments through thousands of transactions. The number of transactions has increased by 450% year-on-year, indicating the growing use of cryptocurrencies for illegal drug transactions.
Elliptic’s report also revealed that multiple suppliers admitted to shipping fentanyl precursors and the drug itself to Mexico, which is one of the major sources of fentanyl that flows into the United States. The blockchain analytics firm stated that most of the fentanyl trafficked into the US is manufactured using precursors imported from Chinese suppliers.
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Another report by blockchain analysis firm Chainalysis supported these findings. It revealed that cryptocurrency addresses associated with suspected China-based fentanyl precursor sellers have received over $37.8 million worth of cryptocurrency since 2018. The report also highlighted the involvement of Latin America-based crypto users in fentanyl transactions, estimating that they have sent nearly $3.6 million worth of cryptocurrency to China-based chemical shops.
The role of cryptocurrency in fentanyl trades has caught the attention of US regulators. US Senator Elizabeth Warren recently called out cryptocurrency’s role in fentanyl drug transactions during a congressional hearing. She highlighted the need for her bill, the Digital Asset Anti-Money Laundering Act, to combat money laundering and cut off drug suppliers and cartels from using cryptocurrencies for illegal activities. Warren emphasized the power of regulators to shut down the funding of the fentanyl trade through cryptocurrencies.
Fentanyl is a synthetic opioid pain reliever that is highly potent, up to 100 times more powerful than morphine. While it is prescribed by doctors to treat severe pain, it is also widely used as a recreational drug due to its powerful effects. The illegal use of fentanyl has been a significant issue in the dark-web economy, contributing to numerous drug overdose deaths in the US. In 2021 alone, there were over 106,000 drug overdose deaths in the US, with synthetic opioids involved in approximately 70,600 of these cases, according to the National Institutes of Health.
To combat the illegal trade of fentanyl, many dark-web markets have started implementing bans on the drug due to the harm it causes to customers and the increased attention from law enforcement agencies. Regulations and efforts to crack down on the use of cryptocurrencies in illegal drug transactions are crucial to curbing the fentanyl epidemic and reducing the associated risks to public health and safety.
