Crypto Deposits to Chinese Drug Producers’ Addresses Double in Early 2024 Compared to 2023

Blockchain intelligence firm TRM Labs revealed that cryptocurrency deposits at cryptocurrency addresses linked to Chinese drug precursor manufacturers 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 worth of cryptocurrencies, with 97% of over 120 manufacturers considering offering cryptocurrency payment options.

Bitcoin dominates transactions

According to TRM Labs, the total amount of cryptocurrencies deposited in wallets associated with these manufacturers more By more than 600% in the period from 2022 to 2023.

Bitcoin remains the dominant cryptocurrency used in these transactions, accounting for approximately 60% of the total payment volume. After Bitcoin, the TRON blockchain saw about 30% of transactions, while Ethereum was used for about 6%.

The report also highlighted that 11 manufacturers were responsible for more than 70% of all cryptocurrency-denominated drug precursor sales. These manufacturers receive funds from unhosted wallets, cryptocurrency exchanges, and payment services, as their wallets are commonly hosted on exchanges.

In addition to favoring cryptocurrencies, Chinese manufacturers also accept fiat currencies through platforms such as PayPal, MoneyGram, Western Union, and traditional bank transfers.

The report revealed that Chinese drug precursor manufacturers mainly target countries including Canada, the Netherlands, Australia, Germany and the United States. Advertisements were also directed towards Russia and neighboring countries, especially for mephedrone precursors.

China's role in the US fentanyl crisis

Recently, a US Congressional committee mentioned The root cause of the fentanyl crisis in the United States lies in the People's Republic of China, which manufactures more than 97% of the precursors used in the global illicit fentanyl trade.

According to the report, China supports the production of illicit fentanyl precursors, which has contributed significantly to the opioid crisis in the United States.

“The Chinese Communist Party has had this program in place since at least 2018. In that time, the party has supported at least 17 illegal synthetic drugs that are Schedule I controlled substances, including 14 deadly fentanyl analogues.”

The committee found that China offers VAT rebates to companies that manufacture fentanyl analogues and other synthetic drugs, provided those products are sold outside China.

Another report released in September 2023 by blockchain intelligence firm Elliptic also revealed a network of 100 individual suppliers facilitating the illicit fentanyl trade. These suppliers use cryptocurrencies, especially Bitcoin, Ethereum, Tron and Monero, to conduct transactions and facilitate the transfer of funds from buyers to suppliers, Elliptic noted.