The analytics firm Chainalysis found financial links between Chinese fentanyl precursor suppliers and Mexican drug cartels through cryptocurrency payments.
The Role of Cryptocurrency in Fentanyl Trade
The Chainalysis report notes that cryptocurrency is increasingly being used in the illicit drug trade. A civil forfeiture case in Wisconsin led to the seizure of $5.5 million in cryptocurrency, showing how U.S.-based money launderers with ties to drug cartels sent funds to Chinese chemical manufacturers. Despite a ban on crypto in China, companies continue to supply most fentanyl precursors and other equipment.
Chinese Suppliers and Mexican Cartels
Since Chinese nationals cannot buy more than $50,000 in foreign currency, they use other financial methods, including crypto and underground banking networks, to bypass capital restrictions. Chainalysis's analysis shows that networks connected to cartels use simple crypto techniques to move money quickly through centralized exchanges and unhosted wallets. Mexican cartels like the Sinaloa Cartel and the Jalisco New Generation Cartel buy these precursors to make synthetic opioids like fentanyl and sell them in the U.S.
Expansion of Synthetic Drug Trade
While fentanyl trafficking is a key example of cryptocurrency-enabled illicit trade, similar methods apply to vendors selling other synthetic drugs. China continues to be a major source for synthetic stimulants, cannabinoids, and chemicals used to make fentanyl. Illegal labs sometimes buy large shipments of precursor chemicals from Chinese suppliers to make a range of synthetic substances for darknet sales. Independent drug sellers working outside of dark web markets also play a significant role, using encrypted Telegram bot shops and dedicated websites for greater transaction control.
The Chainalysis study highlights the importance of cryptocurrency in modern illicit trade, revealing multifaceted ways to bypass financial restrictions and international bans.
