Chinese suppliers of chemicals used in fentanyl production are increasingly relying on cryptocurrency payments to fund their operations, according to a study published by blockchain analytics firm Elliptic.
The study, released Monday, found more than 80 China-based groups that offered to supply fentanyl precursors in exchange for cryptocurrencies, including bitcoin
BTCUSD,
-0.23%
and tether
USDTUSD,
-0.01%.
The wallets associated with these suppliers have seen a 450% increase in the number of payments received in the 12 months ending April 30. Crypto payments to these wallets totaled $27 million, Elliptic found, or enough chemicals to produce fentanyl pills with a street value of approximately $54 billion.
Read more: Mix of fentanyl and veterinary tranquilizer xylazine called an ‘emerging threat’ to public health
The study also found that an alleged fentanyl supplier, Dutch national Alex Peijnenburg, sent $85,000 to one of the Chinese companies identified in the study between March 2019 and 2020. Peijnenburg was sanctioned in November by the Treasury Department for supplying fentanyl and other illicit substances to the U.S. market.
“During our correspondence, the suppliers showed no concerns about how the chemical would be used, with some explaining that it was their best-selling product and could be used to produce fentanyl,” the report reads. “Others pointedly mentioned that they had sold it to customers in Mexico.”
Financial companies in China are banned from offering crypto services and foreign crypto exchanges are not allowed to service Chinese clients, though individuals are not barred from holding digital assets.
The Elliptic study found that most Chinese chemical suppliers were using workarounds to access foreign exchanges and likely use intermediaries to convert digital assets to China’s currency, the renminbi.
“This finding suggests that the trade in fentanyl precursors for crypto can be disrupted by the services that act as gateways into and out of crypto assets,” the report reads. “Elliptic has notified the exchanges being used by these companies, and have flagged hundreds of crypto addresses in our tools as being linked to this activity.”
Washington policymakers have increased their focus on cracking down on the fentanyl trade in the U.S. as deaths from synthetic opioids have risen rapidly. Nearly 110,000 Americans died from drug overdoses in the U.S. last year, according to a preliminary count from the Centers for Disease Control and Prevention, with more than 72,000 of those coming from synthetic opioids like fentanyl.
The Biden administration signaled its support Monday for a Republican-led bill called the Halt Fentanyl Act, which would change the classification of some synthetic opioids and expedite research of these substances, and is expected to pass the House later this week.
Another bipartisan bill gaining steam in the Senate, the FEND Off Fentanyl Act, is aimed at combating the drug trade by increasing tools for law enforcement to target fentanyl-related money laundering.
Read the full article here