Blockchain intelligence company TRM Labs has reported that precursor manufacturers based in China received more than $26 million in cryptocurrency in 2023, with approximately 60% of the payments made in Bitcoin.
It seems that cryptocurrency is increasingly becoming the preferred method of payment for Chinese drug manufacturers, as the amount of crypto deposited into wallets associated with these entities surged sixfold from 2022 to 2023, according to TRM Labs, a blockchain intelligence firm supported by JPMorgan Chase, Visa, Citi, PayPal, and others.
In a recent research report shared with crypto.news, TRM Labs analysts disclosed that deposits into addresses linked to Chinese drug producers 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, with 11 manufacturers accounting for “over 70% of all crypto-denominated sales of drug precursors.”
The data shows that approximately 60% of cryptocurrency payments to Chinese precursor manufacturers were made on the Bitcoin blockchain, followed by 30% on the TRON blockchain and around 6% on the Ethereum blockchain. Despite the increase in cryptocurrency payments, Chinese manufacturers are also open to receiving payments in fiat currencies through PayPal, MoneyGram, Western Union, and bank transfers.
TRM Labs’ study revealed that Chinese drug precursors primarily target Canada, the Netherlands, Australia, Germany, and the U.S. as their top shipping destinations. However, there are also advertisements targeting Russia and neighboring countries for mephedrone precursors.
In April, a U.S. congressional committee reported that China subsidizes the production of illicit fentanyl precursors, contributing to the U.S. opioid crisis. The committee found that China offers value-added tax rebates to companies producing fentanyl analogs, precursors, and other synthetic narcotics if they sell them outside of China.
As mentioned by another blockchain intelligence firm, Elliptic, fentanyl is favored by drug cartels due to its lower production cost compared to heroin and its potency, which is 50 times stronger, making it the leading cause of death for Americans aged 18-45.
For more information, the US Department of Justice has indicted eight Chinese companies for using cryptocurrency in the fentanyl trade.