According to TRM Labs, a blockchain intelligence firm, in 2023, payments in cryptocurrencies by China-based precursor manufacturers rose to more than $26 million.
The firm stated that it made cryptocurrency payments to these manufacturers in 2022, which rose sixfold in 2023.
The information from TRM Labs shows that about $50 million, or 60 percent of the total crypto payments to Chinese precursor makers, was transacted in Bitcoin. Thus, the TRON blockchain was involved in 30% of the payments, and Ethereum was used in 6% of the cases. The payments were mainly from unhosted wallets, cryptocurrency exchanges, and payment services. The manufacturers’ wallets were situated mostly at the exchanges.
The Major Markets and Payment Methods
Chinese precursor manufacturers focused on shipping their products to Canadian, Dutch, Australian, German, and US countries. Other ads aimed at Russia and other nearby countries for the mephedrone precursors. Nevertheless, these manufacturers allowed fiat currency payments through PayPal, MoneyGram, Western Union, and bank transfers.
In April, a US congressional committee claimed that China supports the manufacture of the precursor chemicals used in making fentanyl that is causing the US opioid emergency. The committee noted that China offers value-added tax rebates to those companies that produce fentanyl analogs and other synthetic narcotics’ precursors but for export.
According to TRM Labs, the analysis showed that deposits to the addresses related to Chinese drug manufacturers increased by 106% in the first four months of 2024 compared to the same period in 2023. The report pointed out 11 manufacturers responsible for “more than seventy percent of all cryptocurrency-based drug precursors sales.”
Increasing Trend of Cryptocurrency in Drug Business
Cryptocurrency seems to be gradually being utilized by Chinese drug makers owing to its ability to hide transaction details and the fact that transactions can be easily made. This change is in line with the general tendency that digital currencies are gradually replacing conventional payment methods in the drug business.
Blockchain intelligence companies such as TRM Labs and Elliptic have been observing these developments; Elliptic has pointed out that fentanyl is popular with drug cartels because it is cheaper to produce and more potent than heroin. This is worrisome, especially in the context of the opioid epidemic that is still being experienced in the United States, where fentanyl has been identified to be the leading cause of death among persons within the 18-45 years age bracket.
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