In a groundbreaking investigation where crypto assets play a significant role in illicit activities, Elliptic researchers have uncovered a disturbing trend in the fentanyl precursor trade, with more than 90 China-based companies offering services to supply these dangerous chemicals.
The findings shed light on the thriving global fentanyl crisis and the significant role played by cryptocurrency in facilitating illegal transactions.
What’s more alarming is that 90% of these companies readily accepted cryptocurrency payments, predominantly in Bitcoin and USDT, raising concerns about the exploitation of digital currencies in illicit activities.
The researchers discovered that many of these Chinese companies had also shipped the same precursors to Mexico, indicating an international network involved in the illicit drug trade.
Fentanyl Epidemic Fueled By Cheaper Production & Crypto Profits
Shockingly, despite China’s ban on fentanyl since 2019, several businesses were even willing to supply fentanyl itself, emphasizing the magnitude of the issue at hand.
Through comprehensive blockchain analysis, Elliptic unveiled that the cryptocurrency wallets associated with these companies had received over $27 million in payments.
The number of transactions had witnessed a staggering 450% increase year-on-year. To put this into perspective, this amount of funding could produce fentanyl pills with a street value of approximately $54 billion.
One striking discovery was that a known fentanyl trafficker had made significant Bitcoin payments to one of these Chinese suppliers. This revelation implicates the involvement of established criminal networks in perpetuating the fentanyl crisis.
Fentanyl, being cheaper to produce than heroin and 50 times more potent, has become the leading cause of death for those aged 18-45 in the United States.
While China was historically the main source of illicit fentanyl, the 2019 ban led Mexican drug cartels to fill the void. They now manufacture fentanyl using precursors imported from China, exacerbating the epidemic within the United States.
In response, the US government has increasingly focused on disrupting the financial activities of fentanyl traffickers and their supply networks.
In April 2023, the US Department of the Treasury imposed sanctions on individuals and businesses in China involved in supplying precursor chemicals to Mexican drug cartels. Cryptocurrency wallets used by these entities were also listed, marking a significant step in cracking down on the illegal drug trade.
Elliptic has identified more than 90 Chinese chemical companies involved in the fentanyl precursor trade, with 90% accepting cryptocurrency payments. Most of the payments were made in Bitcoin, followed by the US dollar stablecoin Tether.
By flagging hundreds of crypto addresses associated with this activity, Elliptic aims to disrupt the fentanyl trade and prevent cryptocurrencies from being exploited in such deadly ventures.
The researchers have also notified the exchanges used by these companies, highlighting the importance of monitoring gateways into and out of crypto assets to combat illicit activities effectively.
As fentanyl-related deaths continue to rise, it is evident that urgent and concerted efforts are necessary to tackle this crisis.
Nevertheless, by targeting the financial infrastructure supporting the fentanyl trade, authorities and blockchain analytics companies like Elliptic aim to stem the flow of these deadly drugs and protect vulnerable individuals from its devastating consequences.
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