As countries across the world struggle with the growing menace of drugs, crypto has emerged as a facilitator in many cases. This doesn’t come as a surprise, of course.
Two separate reports by blockchain research firms have revealed that Chinese chemicals companies, suspected of supplying the base substances to produce fentanyl to overseas drug cartels, have earned tens of millions of dollars in cryptocurrencies.
Most of the fentanyl smuggled into the US is manufactured using precursors imported from Chinese suppliers, report researchers from London-based Blockchain analytics firm Elliptic.
Elliptic’s analysis showed that the cryptocurrency wallets used by these Chinese companies have received thousands of payments, totaling over $27 million.
What’s more, the number of transactions has increased by 450 per cent year-on-year.
“About $27 million would purchase enough precursors to produce fentanyl pills with a street value of approximately $54 billion,” the report noted.
Cheaper to produce than heroin and 50 times more potent, this synthetic opioid has fueled an epidemic over the past decade.
It has also become a huge source of profits for international drug cartels.
Elliptic researchers received offers from more than 90 China-based companies to supply fentanyl precursors, 90 per cent of which accepted cryptocurrency payments.
Many allegedly mentioned that they have shipped the same chemicals to Mexico.
“Many of these businesses were also willing to supply fentanyl itself, despite this being banned in China since 2019,” the report said.
In another report, blockchain research firm, Chainalysis, said crypto addresses associated with China-based sellers of precursor chemicals used to make fentanyl received have more than $37.8 million worth of cryptocurrency since 2018.
For many years, China was the main source of illicit fentanyl. But in 2019, following intense diplomatic pressure from the US, the Chinese government banned its export.
“However, far from stemming the tide, illicit fentanyl imports into the US have soared. That’s because Mexican drug cartels have stepped in to fill the void and seize the market – manufacturing their own fentanyl using precursors (chemical ingredients) imported from China,” revealed Elliptic’s report.
The US government has been working to disrupt the financial activity of fentanyl traffickers and their supply networks.
In a fact sheet published on April 11 this year, the White House indicated that it intends to “expand its efforts to disrupt the illicit financial activities that fund these criminals by increasing accountability measures, including financial sanctions”.
The US Department of the Treasury has sanctioned several individuals and businesses in China for supplying precursor chemicals to drug cartels in Mexico for the production of fentanyl intended for the US market.
The sanctions also listed cryptocurrency wallets used by these businesses to receive payments.
“Our researchers received offers to supply large quantities of one particular fentanyl precursor. This chemical is not used in the manufacture of any other products, and is a controlled substance in most countries. However, it remains unregulated in China,” said Elliptic.