Cryptocurrency Flow to Chinese Drug Producers Surges in Early 2024
Crypto deposits into Chinese drug precursor manufacturers' wallets have more than doubled in the first four months of 2024 compared to the same period in 2023, according to a new report by blockchain intelligence firm TRM Labs.
Bitcoin Dominates Transactions
Bitcoin remains the primary cryptocurrency used for these transactions, making up approximately 60% of the total payment volume. The TRON blockchain follows with about 30% of transactions, while Ethereum accounts for roughly 6%. The report also indicated that 11 manufacturers were responsible for over 70% of all crypto-denominated sales of drug precursors. These manufacturers receive funds from unhosted wallets, cryptocurrency exchanges, and payment services, with their wallets most commonly hosted at exchanges.
Multi-currency Acceptance
Aside from cryptocurrencies, Chinese manufacturers also accept fiat currencies through platforms like PayPal, MoneyGram, Western Union, and traditional bank transfers. The report identified that Chinese drug precursor manufacturers target mainly countries including Canada, the Netherlands, Australia, Germany, and the United States. Advertisements have also been directed towards Russia and neighboring countries, particularly for mephedrone precursors.
China’s Role in The US Fentanyl Crisis
A U.S. congressional committee recently reported that the root cause of the U.S. fentanyl crisis lies in the People’s Republic of China, which manufactures over 97% of the precursors used in the global illicit fentanyl trade. According to the report, China subsidizes the production of illicit fentanyl precursors, significantly contributing to the opioid crisis in the United States. “The CCP has had this program in place since at least 2018… they subsidized at least 17 illegal synthetic narcotics that are Schedule I controlled substances, including 14 deadly fentanyl analogues.” The committee found that China provides value-added tax rebates to companies manufacturing fentanyl analogs and other synthetic narcotics, provided these products are sold outside China.
Widening Network for Illicit Trade
Another report by blockchain intelligence firm Elliptic in September 2023 also uncovered a network of 100 individual suppliers facilitating the illicit fentanyl trade. Elliptic noted that these suppliers use cryptocurrencies, particularly Bitcoin, Ethereum, Tron, and Monero, to conduct transactions and facilitate the transfer of funds from buyers to suppliers.
In conclusion, the rise of cryptocurrency transactions for drug precursors highlights the critical role of blockchain technology in the global illicit drug trade. As regulators and enforcement agencies continue their efforts, understanding and tracking these digital assets become increasingly crucial.
For further information, visit the full TRM Labs Report.
