Recent findings from blockchain intelligence firm TRM Labs indicate a significant surge in cryptocurrency deposits into crypto addresses associated with Chinese drug precursor manufacturers. The data revealed that from January to April 2024, cryptocurrency deposits more than doubled compared to the same period in 2023. In 2023, Chinese precursor networks received over $26 million in cryptocurrency, with a staggering 97% of manufacturers offering payment options in digital currencies.
Bitcoin, TRON, and Ethereum emerged as the dominant cryptocurrencies used for transactions, with Bitcoin leading the pack accounting for approximately 60% of the total payment volume. TRON blockchain accounted for approximately 30% of transactions, while Ethereum was used for roughly 6%. The report also highlighted that 11 manufacturers were responsible for over 70% of all crypto-denominated sales of drug precursors.
Chinese drug precursor manufacturers primarily target countries such as Canada, the Netherlands, Australia, Germany, and the United States. Additionally, there have been targeted advertisements towards Russia and neighboring countries, particularly for mephedrone precursors. This global reach indicates the widespread impact of Chinese drug precursor networks.
Recent reports by a U.S. congressional committee have linked the rise in cryptocurrency payments by Chinese drug precursor manufacturers to the opioid crisis in the United States. The committee identified the People’s Republic of China as the main source of over 97% of precursors used in the global illicit fentanyl trade. The report exposed China’s subsidies for the production of illicit fentanyl precursors, exacerbating the opioid crisis in the U.S.
Use of Cryptocurrencies in Illicit Transactions
The suppliers of fentanyl analogs and synthetic narcotics in China utilize cryptocurrencies, particularly Bitcoin, Ethereum, Tron, and Monero, to facilitate transactions and transfer funds. China’s provision of value-added tax rebates to companies manufacturing these substances for sales outside its borders has further incentivized the use of cryptocurrencies in illicit transactions.
The rise of cryptocurrency payments in Chinese drug precursor manufacturers poses a significant challenge in combating the global illicit drug trade. The intersection of blockchain technology, cryptocurrency payments, and illicit drug manufacturing underscores the pressing need for international cooperation and regulatory measures to address this growing threat.
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