In a recent report released by Elliptic, a leading crypto asset analysis company, it has been revealed that a significant number of Chinese traders involved in the fentanyl trade are accepting payments in cryptocurrencies.
Fentanyl, a powerful synthetic opioid used as an analgesic, has become a grave concern in the United States due to its role in overdoses and deaths, particularly among young adults. The report sheds light on the utilization of cryptocurrencies as a means of payment for fentanyl transactions and raises concerns about the involvement of international drug cartels.
The Rise of Fentanyl-Related Cryptocurrency Transactions
Elliptic’s research team took the initiative to contact fentanyl-related businesses via email and conduct an extensive survey. The results were striking, with over 90 Chinese companies identified as selling fentanyl precursors and accepting cryptocurrencies as a payment method. Some of these vendors explicitly mentioned that their products could be utilized in the production of fentanyl.
Notably, when selling precursors to customers in Mexico, these vendors reported receiving payments in USDT (a US dollar-denominated stablecoin) or Bitcoin (BTC), both of which are popular cryptocurrencies.
According to Elliptic, approximately 90% of these merchants provided cryptocurrency wallet addresses for receiving payments. Shockingly, the research indicated a staggering 450% year-on-year increase in cryptocurrency remittances to these merchants.
Cumulatively, these merchants’ wallets have received over 3.7 billion yen ($27 million) to date. It is worth mentioning that the Chinese government has been cracking down on cryptocurrencies, including banning cryptocurrency exchanges within its borders. Nevertheless, the majority of the Chinese merchants surveyed by Elliptic were found to possess and use accounts on three exchanges located outside of China.
Potential Use of Intermediaries and Government Response
Elliptic’s report also raises concerns that fentanyl traders may be utilizing intermediaries to convert cryptocurrencies into yuan, the Chinese currency. This suggests a complex network involved in the process of cryptocurrency payments for fentanyl transactions.
In response to these alarming findings, Elliptic has notified the three cryptocurrency exchanges involved about the use of fentanyl-related vendors. Additionally, the company has red-flagged hundreds of cryptocurrency addresses linked to fentanyl-related sales operations within its analytics tools.
The U.S. government is not oblivious to the involvement of cryptocurrencies in fentanyl-related transactions. In fact, back in 2019, it was highlighted that online payments, including virtual currencies, were being utilized in the distribution process of fentanyl.
In April of this year, the U.S. Treasury Department added a Chinese company to its economic sanctions list for supplying fentanyl precursors to Mexican drug cartels. Furthermore, the department also sanctioned the cryptocurrency wallets used by these companies to receive payments.
The White House has vowed to intensify efforts to crack down on the fentanyl supply chain, acknowledging that drug traffickers are leveraging cross-border deals and technology to facilitate their illicit activities.
Conclusion
The Elliptic report’s findings regarding Chinese traders accepting cryptocurrencies for fentanyl transactions have unveiled a concerning trend in the global drug trade. Fentanyl, a potent opioid contributing to a significant number of deaths in the United States, has become a lucrative profit source for international drug cartels.
The increasing use of cryptocurrencies in these transactions poses significant challenges for law enforcement agencies and underscores the need for international cooperation to combat the fentanyl supply chain. As governments and regulatory bodies strive to curb these illegal activities, the focus on monitoring and regulating cryptocurrency transactions will continue to grow to safeguard public health and safety.
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