LONDON, May 24 (Reuters) – Suspected sellers of chemicals used to manufacture the deadly drug fentanyl have received tens of millions of dollars worth of cryptocurrency since 2018, according to blockchain analytics firm Chainalysis.
Regulators around the world have warned that crypto assets are used to finance illegal activity. Crypto transactions related to illicit activity hit a record $20 billion in 2022, Chainalysis said in January.
In a report on Wednesday, Chainalysis said people involved in unlawful fentanyl-related transactions typically use cryptocurrency because of its “near-instant, cross-border, and pseudonymous features”.
It said it had identified “dozens” of cryptocurrency wallet addresses which have similar patterns of activity to four addresses already identified by authorities as belonging to Chinese chemical shops.
Together, these addresses have received more than $37.8 million of cryptocurrency since 2018, Chainalysis said, adding that the true cryptocurrency volume total is “likely much higher”.
“Many drug traffickers use crypto in an attempt to evade law enforcement, thus facilitating the ongoing opioid epidemic in the United States and other drug-related crises worldwide,” Chainalysis said.
The report echoes findings by blockchain researcher Elliptic, which said on Tuesday that it found 90 China-based companies willing to sell fentanyl precursor chemicals, 90% of which accepted cryptocurrency payments.
The crypto wallet addresses these sellers provided have received $27 million worth of cryptocurrency payments, mostly in bitcoin or the stablecoin Tether, Elliptic said.
Fentanyl, a synthetic opioid 50 times stronger than heroin, has become a major black market narcotic in the United States, killing nearly 200 Americans per day.
China has said there is no illegal trafficking of fentanyl between China and Mexico. The U.S. believes Chinese traffickers have shifted from manufacturing finished fentanyl to mostly exporting the precursor chemicals to Mexican cartels, which make and deliver the final product.
Chainalysis said that crypto transaction volume to Chinese chemical shops “correlates positively” with fentanyl-related drug seizes at the U.S.-Mexico border.
Chainalysis noted that the chemical shops sell “more than just fentanyl precursor chemicals” so some of the payment flows it identified could be unrelated to the drug.