Chinese Fentanyl Precursor Suppliers Received $27M in Crypto: Report
China-based suppliers of chemical precursor – ingredients used to produce synthetic opioid fentanyl – raked in more than $27 million in crypto payments, according to a research report by Elliptic. Exporting fentanyl precursors and cryptocurrency are banned in mainland China.
Crypto payments to Fentanyl Ingredient Suppliers Up 450% Year-over-Year
Research by blockchain analysis provider Elliptic found that firms based in China received more than $27 million in crypto payments, primarily Bitcoin, for supplying chemical ingredients used to produce fentanyl.
According to the report, Elliptic’s team of researchers received offers from over 90 Chinese companies to supply precursors – essential chemical ingredients used in the production of fentanyl. 90% of those firms offered crypto as one of the primary payment methods, with Bitcoin being the most popular cryptocurrency, followed by Tether’s stablecoin USDT.
The report also states that the number of crypto payments to precursor suppliers surged 450% year-over-year. The $27 million that suppliers received is enough to purchase enough precursor to manufacture fentanyl pills with a street value of around $54 billion, Elliptic says.
Fentanyl is a powerful synthetic opioid similar to morphine but is fifty to a hundred times more potent, according to National Institute on Drug Abuse (NIDA). Fentanyl overdoses are currently the leading cause of death for those aged between 18 and 45 in the US.
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Mexico Drug Cartels Replaced China as Top Illicit Fentanyl Exporter
Thanks to its strong potency, and the fact that it is significantly cheaper to produce than heroin, fentanyl has become one of the biggest sources of profits for international drug cartels. For several years, China was the world’s largest exporter of illicit fentanyl; however, in 2019, Beijing banned its exports following intense diplomatic pressure from the US government.
But that did not stop the unprecedented illicit fentanyl imports into the US. Fentanyl imports into the US soared as Mexican cartels started to produce the drug using precursors imported from China.
Elliptic researchers shared their experience with the Chinese precursor suppliers, who reportedly showed no concerns about how precursors would be used following the sale. Moreover, some suppliers noted how the chemicals were their best-selling product, while others even disclosed that they sold it to Mexico-based customers. Elliptic asked the suppliers whether buyers from Mexico used crypto to pay for the product, with one of them responding: “They always use USDT or Bitcoin to pay. It is no problem.”
Crypto has become an increasingly popular payment method for those engaging in illicit activities in recent years. Earlier this month, a White House report revealed that around 50% of North Korea’s missile and nuclear programs are funded by stolen crypto funds. The East Asian country is responsible for some of the biggest crypto hacks, stealing around $1 billion in cryptocurrencies in 2022.
What should global regulators do to prevent crypto from being used for illicit activities? Let us know in the comments below.