Blockchain intelligence firm TRM Labs has reported a significant increase in cryptocurrency deposits into crypto addresses associated with Chinese drug precursor manufacturers in the first four months of 2024 compared to the same period in 2023. In 2023, these networks received over $26 million in cryptocurrency payments, with 97% of the manufacturers offering payment options in digital currencies.
The total amount of cryptocurrency deposited into wallets linked to these manufacturers surged by more than 600% from 2022 to 2023, indicating a growing trend towards the use of digital assets in the drug precursor industry. Among the various cryptocurrencies used for transactions, Bitcoin emerged as the top choice, accounting for around 60% of the total payment volume. TRON blockchain and Ethereum followed with approximately 30% and 6% of transactions, respectively.
TRM Labs’ report also revealed that a small number of manufacturers, specifically 11, 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 commonly hosted at exchanges.
In addition to accepting cryptocurrencies, Chinese drug precursor manufacturers also facilitate payments through traditional fiat channels such as PayPal, MoneyGram, Western Union, and bank transfers. The report highlighted that these manufacturers primarily target countries like Canada, the Netherlands, Australia, Germany, and the United States, with promotional efforts also directed towards Russia and neighboring nations for mephedrone precursors.
The role of China in the global illicit fentanyl trade has come under scrutiny, with a U.S. congressional committee attributing over 97% of fentanyl precursors to the People’s Republic of China. The committee’s report indicated that China subsidizes the production of illicit fentanyl precursors, contributing significantly to the opioid crisis in the United States.
Furthermore, a September 2023 report by blockchain intelligence firm Elliptic uncovered a network of 100 individual suppliers involved in the illicit fentanyl trade. These suppliers leverage cryptocurrencies like Bitcoin, Ethereum, Tron, and Monero to facilitate transactions and transfer funds between buyers and suppliers.
Overall, the increasing use of cryptocurrencies in the drug precursor industry and the role of China in the illicit fentanyl trade underscore the need for enhanced regulatory measures and international cooperation to combat the proliferation of illicit substances and safeguard public health.