Tens of Millions are Made in Crypto's Fentanyl Trade: Security Experts

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According to reports from Chainalysis and Elliptic, cryptocurrency is fueling the trade of fentanyl and its precursors.

China has long been identified by law enforcement agencies around the world as a source of deadly fentanyl and the precursors used to make it. How much of this trade is conducted in cryptocurrency has been quantified in new studies from Chainalysis and Elliptic.

Cryptocurrency is fueling the trade of fentanyl and its precursors

Wallets linked to Darknet vendors who sell fentanyl and its precursors have reportedly received $27 million in payments, according to Elliptic, which published its report on the subject on Tuesday. However, it is unclear over what time period this occurred. Chainalysis estimated the amount to be $37.8 million since 2018. According to Elliptic’s estimate, $27 million could buy enough precursor to make fentanyl pills with a street value of about $54 billion.

According to the reports, the majority of these transactions use USDT or bitcoin rather than privacy currencies, making them very simple to follow on-chain. Elliptic researchers found over 90 China-based businesses that were willing to provide fentanyl precursors, and 90% of them took cryptocurrency payments. One vendor informed Elliptic that its customers in Mexico frequently used cryptocurrencies as a form of payment. Elliptic was informed by the supplier that “they always use USDT or Bitcoin to pay,” referring to the stablecoin Tether by its ticker symbol. “It is not a problem.”

The inherent transparency of cryptocurrencies, according to Jardine, is a feature that is frequently disregarded.

“In scenarios involving the monitoring of illicit operations like the global fentanyl trade, this transparency becomes particularly advantageous.”

The analytics company claimed that the use of cryptocurrency exchange accounts by China-based businesses would surprise some people. As part of the country’s assault against cryptocurrency, China announced that it would start limiting nationals’ access to overseas exchanges in 2019. Fentanyl trafficking was connected to cryptocurrencies like Bitcoin, Ethereum, and Monero—the so-called “privacy coin” that has gained popularity on dark web marketplaces—according to a study published by the White House the same year.

How they shipped fentanyl

China was the biggest producer of fentanyl precursors in 2019, according to the Drug Enforcement Agency (DEA), and India was another significant producer. Using data from U.S. Customs and Border Protection, Chainalysis discovered a correlation between on-chain flows to suspected chemical shop addresses and fentanyl seizures at the border between the U.S. and Mexico. According to China, there is no illicit fentanyl trafficking between China and Mexico. The United States thinks that Chinese drug traffickers have switched from producing finished fentanyl to mostly selling the chemicals used to make it to Mexican gangs, who then produce and distribute it.

The putative fentanyl precursor shipments were tracked by Chainalysis researchers to locations thought to be chemical production facilities around the world, and they identified regions with high exposure as Latin America, North America, Europe, and Asia. The findings, according to the report, support regional patterns previously described by the DEA showing that fentanyl precursor chemicals are illegally shipped to Latin America where they are used to produce fentanyl before being shipped to the U.S. for sale.

More than 100,000 Americans died from drug overdoses

In the United States, fentanyl, a synthetic opioid that is inexpensive to create and significantly more deadly than heroin, is thought to be responsible for thousands of drug overdose fatalities each year. With approximately 200 Americans dying every day from fentanyl overdoses, it has grown to be a significant black market drug in the US. It is currently the country’s number one killer of people between the ages of 18 and 45. According to National Institutes of Health data, synthetic opioids were a factor in almost 70,600 of the more than 106,000 drug overdose deaths that occurred in the U.S. in 2021.

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