TL; DR BREAKDOWN
- By giving precursor chemicals to drug cartels all across the world, Chinese chemical vendors are facilitating the illicit fentanyl trade.
- These Chinese suppliers accept cryptocurrency payments from over 90% of customers, with Bitcoin being the most popular option.
- Law enforcement has difficulties due to the usage of cryptocurrencies in the fentanyl trade, and measures are being taken to thwart the financial operations of fentanyl traffickers.
Chinese chemical vendors, who supply essential precursor chemicals to drug cartels all around the world, have emerged as important facilitators in the illicit fentanyl trade. Over 90 Chinese organizations have been identified as providers of fentanyl precursors, and over 90% of them accept bitcoin as payment, according to a new analysis by Elliptic, a prominent crypto analytics platform.
CHINA’S INEFFECTUAL FENTANYL EXPORT BAN
China put a restriction on the export of fentanyl in 2019 in response to diplomatic pressure from the US to reduce the drug’s illicit usage. The fentanyl crisis has not been stopped by this action, though. Instead, Mexican drug gangs have filled the gap created by the absence of Chinese suppliers by starting to produce fentanyl using Chinese-imported precursor chemicals. Fentanyl overdoses are now the country’s number one cause of mortality for those between the ages of 18 and 45, which have made the epidemic worse.
Elliptic’s study shows that despite the Chinese government’s anti-crypto position, the Chinese chemical suppliers participating in the fentanyl trafficking have accepted bitcoin payments. According to the research of blockchain transactions, these vendors have received over $27 million in cryptocurrency payments, which represents a substantial 450% increase in transactions over the prior year. The most widely used cryptocurrency by far is Bitcoin, closely followed by the stablecoin Tether (USDT), which is tied to the US dollar. Law enforcement organizations have a lot of difficulties as a result of the usage of cryptocurrencies in these transactions, making it challenging to identify and stop illicit money flows.
Beyond just being used as payment, bitcoins are being used in the fentanyl trade. A well-known fentanyl dealer was found on the blockchain by Elliptic to have paid one of the Chinese suppliers tens of thousands of dollars in Bitcoin. With one of the suppliers, Alex Peijnenburg transacted with Bitcoin worth $84,598 in total before being sanctioned by US authorities in November 2022 for his role in the sale of fentanyl and other substances. The confluence between cryptocurrencies and the international drug trafficking must be combated, and our findings highlight the necessity for more efforts in this area.
A well-known fentanyl dealer was found on the blockchain by Elliptic to have paid one of the Chinese suppliers tens of thousands of dollars in Bitcoin. With one of the suppliers, Alex Peijnenburg transacted with Bitcoin worth $84,598 in total before being sanctioned by US authorities in November 2022 for his role in the sale of fentanyl and other substances. The confluence between cryptocurrencies and the international drug trafficking must be combated, and our findings highlight the necessity for more efforts in this area.
REGULATION AND FINANCIAL DISRUPTION ARE THE SOLUTIONS TO THE PROBLEM
Given the gravity of the situation, the US government has made stifling the financial operations of fentanyl traffickers and their supply networks a top priority. The White House has stated that it is committed to stepping up efforts to bolster accountability controls, such as financial sanctions. To achieve this, the US Department of the Treasury imposed sanctions on a number of people and organizations in China for providing precursor chemicals to Mexican drug cartels making fentanyl for the US market. The government’s intention to halt the illicit financial flows connected to the fentanyl trade was highlighted by the listing of the cryptocurrency wallets used by the sanctioned entities.
