In 2023, payments in cryptocurrencies to China-based precursor manufacturers surged to over $26 million, according to blockchain intelligence firm TRM Labs. This represents a sixfold increase from 2022.
TRM Labs’ data indicates that about $50 million, or 60 percent of the total crypto payments to these Chinese precursor makers, were conducted using Bitcoin. The TRON blockchain accounted for 30 percent of the payments, while Ethereum was used for 6 percent. These payments primarily originated from unhosted wallets, cryptocurrency exchanges, and payment services, with the manufacturers’ wallets being mainly hosted at exchanges.
Major Markets and Payment Methods
Chinese precursor manufacturers have been targeting markets in Canada, the Netherlands, Australia, Germany, and the United States. There are also advertisements aimed at Russia and other nearby countries for mephedrone precursors. These manufacturers accept fiat currency payments via PayPal, MoneyGram, Western Union, and bank transfers.
US Congressional Committee Findings
In April, a US congressional committee claimed that China supports the production of precursor chemicals used in manufacturing fentanyl, which is fueling the US opioid crisis. The committee noted that China offers value-added tax rebates to companies that produce fentanyl analogs and other synthetic narcotics’ precursors for export.
Rising Crypto Payments
TRM Labs’ analysis shows that deposits to addresses linked to Chinese drug manufacturers increased by 106 percent in the first four months of 2024 compared to the same period in 2023. The report identified 11 manufacturers responsible for over seventy percent of all cryptocurrency-based drug precursor sales.
The Growing Use of Cryptocurrency in the Drug Trade
The use of cryptocurrency by Chinese drug makers is increasing due to its ability to obscure transaction details and facilitate easy transfers. This trend reflects the broader movement towards digital currencies replacing traditional payment methods in the drug trade. Blockchain intelligence firms like TRM Labs and Elliptic have been monitoring these developments. Elliptic has noted that fentanyl is favored by drug cartels because it is cheaper to produce and more potent than heroin. This is particularly concerning in light of the ongoing opioid epidemic in the United States, where fentanyl is the leading cause of death among individuals aged 18-45.
Source: coinfomania.com
