- Blockchain intelligence firm TRM Labs has reported a significant increase in cryptocurrency deposits into addresses linked to Chinese drug precursor manufacturers in early 2024 compared to the same period in 2023.
- In 2023, these Chinese networks amassed over $26 million in digital currencies, with 97% of the studied manufacturers accepting cryptocurrency payments.
- A dramatic 600% increase in crypto deposits was noted from 2022 to 2023, with Bitcoin leading the transactions, followed by TRON and Ethereum.
New insights reveal the rapidly growing link between cryptocurrency transactions and the manufacturing of drug precursors by Chinese companies, amidst the rising US fentanyl crisis.
Bitcoin Dominates Transactions
TRM Labs observed a significant surge in the total cryptocurrency deposited into wallets associated with these manufacturers, exceeding 600% growth from 2022 to 2023. Bitcoin continues to dominate these transactions, making up about 60% of the total payment volume. TRON accounts for around 30%, while Ethereum is used in approximately 6% of these transactions.
Notably, 11 manufacturers were found to be responsible for over 70% of all the crypto-based sales for drug precursors. These entities often receive funds from unhosted wallets, various cryptocurrency exchanges, and other digital payment services, with the wallets predominantly hosted at exchanges.
Multifaceted Payment Methods
Besides cryptocurrencies, these Chinese manufacturers also accept traditional fiat currencies through services like PayPal, MoneyGram, Western Union, and standard bank transfers. This multi-pronged approach allows them to cater to a diverse international clientele.
China’s Role in the US Fentanyl Crisis
According to a recent report by a U.S. congressional committee, the root cause of the U.S. fentanyl crisis lies within the People’s Republic of China, which produces over 97% of the precursors required for the global illicit fentanyl trade. This revelation underscores China’s significant role in exacerbating the opioid epidemic in the United States.
The committee’s findings indicate that since 2018, China has been subsidizing the production of these illicit precursors, providing value-added tax rebates to companies that manufacture fentanyl analogs and other synthetic narcotics, provided they export these substances.
Correspondingly, a September 2023 report by blockchain intelligence firm Elliptic uncovered a network of 100 individual suppliers who use cryptocurrencies like Bitcoin, Ethereum, Tron, and Monero to facilitate the trafficking of illicit fentanyl.
International Targets and Marketing Strategies
Chinese manufacturers mainly target countries such as Canada, the Netherlands, Australia, Germany, and the United States. They also direct advertisements toward Russia and neighboring regions, especially marketing precursors for mephedrone. This broad-based marketing strategy ensures a deep and widespread customer base across the globe.
Conclusion
The latest reports from TRM Labs and U.S. congressional findings lay bare the intricate relationship between cryptocurrency usage and the illicit drug trade facilitated by Chinese manufacturers. With the exponential rise in digital currency transactions within this domain, it becomes imperative for global regulatory bodies to adopt a more rigorous approach. The insights gleaned underscore the urgent need for collaborative international efforts to curb this growing menace, aiming for a significant reduction in the global opioid crisis.
