Recent findings from blockchain intelligence firm TRM Labs have brought to light the significant increase in cryptocurrency deposits into crypto addresses associated with Chinese drug precursor manufacturers. The data reveals that these deposits more than doubled in the first four months of 2024 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. The report from TRM Labs also indicates that the total amount of cryptocurrency deposited into wallets linked to these manufacturers surged by over 600% from 2022 to 2023.
Bitcoin stands out as the dominant cryptocurrency used for transactions in these networks, accounting for roughly 60% of the total payment volume. Following Bitcoin, the TRON blockchain was used for approximately 30% of transactions, while Ethereum was utilized for around 6% of the payments.
The report highlights that 11 manufacturers were responsible for over 70% of all crypto-denominated sales of drug precursors. These manufacturers receive funds from various sources, including unhosted wallets, cryptocurrency exchanges, and payment services. Interestingly, their wallets are most commonly hosted at exchanges. Furthermore, in addition to the preference for cryptocurrencies, Chinese manufacturers also accept fiat currencies through platforms such as PayPal, MoneyGram, Western Union, and traditional bank transfers.
Targeted Countries and Advertisements
Chinese drug precursor manufacturers tend to target countries including Canada, the Netherlands, Australia, Germany, and the United States. Furthermore, advertisements have been directed towards Russia and neighboring countries, particularly for mephedrone precursors.
A recent report from a U.S. congressional committee has shed light on the root cause of the fentanyl crisis in the United States. The committee identified the People’s Republic of China as the main producer of over 97% of the precursors used in the global illicit fentanyl trade. China’s subsidization of the production of illicit fentanyl precursors has significantly contributed to the opioid crisis in the United States.
It was noted that Chinese suppliers of fentanyl analogs and other synthetic narcotics utilize cryptocurrencies, particularly Bitcoin, Ethereum, Tron, and Monero, to conduct transactions and facilitate the transfer of funds from buyers to suppliers. This method of payment has enabled these networks to operate with a certain level of anonymity and evade traditional financial oversight.
The rise of cryptocurrency transactions in Chinese drug precursor networks poses a significant challenge in combating the illicit drug trade. Authorities and regulatory bodies must remain vigilant in monitoring and addressing these emerging trends to safeguard public health and safety.
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