Cryptocurrencies have been increasingly used as a means of conducting illicit activities, including the sale and purchase of illegal drugs. One such example is the sale of fentanyl, a potent synthetic opioid responsible for a growing number of overdoses worldwide. However, recent research conducted by TRM Labs suggests that the growth rate of crypto-denominated fentanyl sales has slowed down in 2023, indicating a potential impact of U.S. sanctions on the industry.
Decreased Growth Rate in Fentanyl Sales
TRM Labs’ comprehensive study focused on over 100 online vendors of fentanyl and its precursors, revealing a decline in the growth rate of cryptocurrency-based fentanyl sales in 2023. While these sales experienced an average growth rate of 155% since 2019, the first three quarters of the year saw only a 60% increase. This significant slowdown raises questions about the effectiveness of recent aggressive measures taken by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).
The study by TRM Labs indicates a potential correlation between the decline in fentanyl sales and the extensive sanctions implemented by OFAC in 2023. Throughout the year, OFAC sanctioned a total of 82 individuals and entities associated with fentanyl production and distribution, a stark increase from previous years. Major players, including a China-based network involved in the manufacturing and distribution of fentanyl precursors, were targeted by these sanctions.
Furthermore, OFAC’s efforts reached the infamous Sinaloa Cartel, a major drug trafficking organization. Under U.S. pressure, the cartel declared a halt to its fentanyl production activities. Additionally, Mexican nationals and Wuhan Shuokang Biological Technology Co., Ltd., a significant Chinese precursor manufacturer, faced the impact of these sanctions.
TRM Labs’ analysis revealed a clear correlation between major sanctions and a decline in online fentanyl sales involving cryptocurrency. Notably, sales volumes experienced significant drops in April and May, coinciding with the imposition of sanctions. Another plunge was observed in October following the designation of 28 individuals and entities. While it is challenging to attribute the decrease solely to OFAC’s actions, the disruptions caused by these sanctions undoubtedly impact supply chains and increase risks for those involved with targeted manufacturers.
Although the decrease in sales suggests a disruption in the market, it does not necessarily indicate a reduction in demand for fentanyl. This raises concerns that new vendors may emerge to fill the gap left by those sanctioned. While China-based entities appear to be less affected due to limited cooperation with U.S. law enforcement, international buyers face heightened scrutiny from U.S. authorities.
The decrease in crypto-related fentanyl sales presents an opportunity for law enforcement agencies to further crackdown on illegal drug activities. However, it also underscores the need for international cooperation and coordinated efforts to combat the use of cryptocurrencies in facilitating drug transactions.
The research conducted by TRM Labs highlights the impact of U.S. sanctions on the growth rate of crypto-denominated fentanyl sales. The decline in sales suggests a potential disruption in supply chains and increased risks for those engaged with targeted manufacturers. While the decrease in sales does not necessarily indicate a decrease in demand, it opens the door for new vendors to emerge, thus requiring continued vigilance and international collaboration to combat the illegal drug trade facilitated by cryptocurrencies.