The United States Treasury’s Office of Foreign Assets Control (OFAC) has taken action against several cryptocurrency wallets that are associated with the illegal fentanyl trade. The OFAC recently added a new set of crypto wallets to its list of specially designated nationals (SDN), targeting a drug trafficking network primarily centered in China. The wallets in question were used by six entities, including five individuals and one company named Valerian Labs, to facilitate their illicit operations. The government flagged a total of 17 wallet addresses across Bitcoin (BTC), Ethereum (ETH), and Tron (TRX) networks. It is worth noting that most of the illicit transactions on Ethereum and TRON networks involved the use of stablecoins, which are cryptocurrency tokens backed by relatively price-stable fiat currencies like the U.S. dollar.
The wallets associated with the individuals, except for Valerian Labs, were hosted on a centralized crypto exchange through which they received hundreds of thousands of dollars worth of cryptocurrency. However, the specific exchange used was not disclosed. According to a blog post by blockchain surveillance firm Chainalysis, these addresses collectively received nearly $3.8 million worth of cryptocurrency, potentially representing significant quantities of drugs trafficked into the United States and other countries.
Chainalysis conducted an investigation into these wallets and found that they received funds through a series of small transfers in consistent amounts from personal wallets and other mainstream exchanges. This pattern of consistent payments indicates the sale of specific goods, such as fentanyl and associated precursor chemicals. The report by Chainalysis also highlighted that China-based fentanyl sellers alone have received approximately $37.8 million worth of cryptocurrency since 2018.
While the U.S. Treasury has previously sanctioned Bitcoin addresses linked to such suppliers, this latest action marks the first time addresses on the Tron blockchain have been targeted. Additionally, in a separate incident last month, the OFAC sanctioned an Ethereum address associated with a member of a Mexican money laundering network who allegedly used crypto to transfer fentanyl proceeds across the border.
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This action by the U.S. Treasury aligns with the concerns raised by US Senator Elizabeth Warren earlier this year. During a congressional hearing in May, Warren called out cryptocurrency’s role in fentanyl drug transactions and pushed for the implementation of her bill, the Digital Asset Anti-Money Laundering Act, which aims to combat money laundering. Warren believes that implementing stricter regulations on crypto will help cut off drugs suppliers and cartels from using cryptocurrencies to fuel their illegal businesses.
Fentanyl is an extremely potent synthetic opioid pain reliever that is up to 100 times more potent than morphine. While it is prescribed by doctors to treat severe pain, it is also made and used illegally as a recreational drug due to its powerful effects on the body. Fentanyl has long been one of the most dangerous commodities in the underground cryptocurrency economy.
The recent actions taken by the U.S. Treasury’s OFAC against cryptocurrency wallets associated with the illegal fentanyl trade demonstrate the government’s commitment to cracking down on such activities. By targeting these wallets and their associated individuals and entities, the government aims to disrupt the drug trafficking network and prevent further illicit transactions. These actions also highlight the significance of blockchain surveillance firms like Chainalysis in detecting and investigating illegal activities that involve cryptocurrencies. With the continued development of technology and regulatory measures, it is expected that further efforts will be made to combat the use of cryptocurrencies in illicit activities such as the fentanyl trade.
