A recent study conducted by Elliptic, a leading provider of blockchain analytics and crypto compliance solutions, has shed light on the alarming connection between the fentanyl epidemic in the United States and cryptocurrency transactions. The research identified over 90 Chinese businesses that supply fentanyl precursors to the U.S., and a staggering 90% of them accept payments in cryptocurrencies. These businesses were found to be sending the precursors to Mexico.
According to Elliptic’s research, these businesses had received payments totaling over $27 million via their cryptocurrency wallets. Notably, the volume of transactions has experienced a staggering 450% year-on-year increase. However, it is important to highlight that the $27 million figure pales in comparison to the estimated value of the Chinese fentanyl export industry, which is in the billions of dollars.
The research also showed that despite China’s prohibition on cryptocurrency exchange operations and the inability of foreign exchanges to offer services to Chinese citizens, most chemical suppliers accepting cryptocurrencies had accounts with three different exchanges based outside of China. These companies most likely rely on intermediaries to help them convert Bitcoin payments into yuan.
China, historically the primary producer of fentanyl, implemented a ban on the narcotic in 2019 following diplomatic discussions with the United States. In response, the U.S. government intensified efforts and implemented various measures to combat the expansion of the fentanyl trade.
The U.S. Treasury implemented specific measures to sanction individuals involved in illicit activities using digital currencies. The use of crypto mixers, which can help criminals conceal their identities, has been a particular concern. In light of this, the U.S. government has already implemented preventive measures to curb their usage.
In a significant development in early May 2023, law enforcement agencies arrested nearly 300 individuals involved in a dark web fentanyl marketplace. They successfully seized a total of $53 million in cryptocurrency and cash.
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