An Elliptic report revealed that Chinese chemical manufacturers accept cryptocurrencies for fentanyl precursors and have received over $27 million in crypto payments.
Doctors legally prescribe fentanyl for severe pain, but illegal producers and sellers also offer it as a recreational drug. Fentanyl is highly addictive and can cause fatal overdoses.
Most of the fentanyl trafficked into the U.S. is made with precursors imported from Chinese suppliers, according to Elliptic.
Crypto payments and fentanyl precursor trade
Elliptic said it found over 90 Chinese chemical companies selling fentanyl precursors and advertised their products on the open web. Of these, 90% accepted cryptocurrency payments, mostly Bitcoin and Tether.
Elliptic analyzed the cryptocurrency wallets used by these companies and estimated that they received over $27 million in crypto payments in the past five years, with a 450% increase in the past year.
“$27 million would purchase enough precursor to produce fentanyl pills with a street value of approximately $54 billion,”
Elliptic
Some suppliers also offered to provide fentanyl itself or other synthetic opioids that are more potent than fentanyl but are legal in China.
Most suppliers used accounts at three unnamed non-Chinese exchanges, according to Elliptic. Elliptic also notified the exchanges and flagged hundreds of crypto addresses linked to this activity.
Fentanyl overdose crisis and its impact
Using cryptocurrency for fentanyl precursor trade shows how crypto can facilitate illicit transactions and evade regulations.
According to the National Institutes of Health, fentanyl overdose deaths claimed more than 70,000 lives in the United States in 2021. Elliptic noted that Fentanyl overdoses are also the primary cause of death among Americans aged 18 to 45.
The U.S. has sanctioned fentanyl suppliers, including a Dutch individual who made an $85,000 payment to one of the Chinese companies identified by Elliptic.
The United States has also urged China to ban the production and export of fentanyl precursors and other synthetic opioids. China has pledged to cooperate but blamed the U.S. for its high drug demand.