TRM Labs, a blockchain intelligence firm, has reported that precursor manufacturers based in China received more than $26 million in cryptocurrency in 2023, with approximately 60% of payments made in Bitcoin.
The use of cryptocurrency as a preferred payment method by Chinese drug manufacturers seems to be on the rise, as the amount of crypto deposited into wallets associated with these entities increased sixfold from 2022 to 2023, according to TRM Labs. This firm is supported by major financial institutions like JPMorgan Chase, Visa, Citi, and PayPal.
In a recent research report shared with crypto.news, TRM Labs analysts revealed 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 responsible for “over 70% of all crypto-denominated sales of drug precursors.”
The data shows that around 60% of crypto payments to Chinese precursor manufacturers were on the Bitcoin blockchain, followed by 30% on TRON and about 6% on Ethereum. Despite the increase in crypto payments, Chinese manufacturers also seem to be open to accepting payments in fiat currencies through PayPal, MoneyGram, Western Union, and bank transfers.
According to TRM Labs’ study, Chinese drug precursors primarily target Canada, the Netherlands, Australia, Germany, and the U.S. as their top countries for shipping. Additionally, there are advertisements targeting Russia and neighboring countries for mephedrone precursors.
In April, a U.S. congressional committee revealed that China subsidizes the production of illicit fentanyl precursors, contributing to the opioid crisis in the U.S. The committee found that China offers tax rebates to companies producing fentanyl analogs, precursors, and other synthetic narcotics if they sell them outside China.
As noted 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.