Chinese businesses selling the chemicals used to make Fentanyl are accepting payment in Bitcoin and Tether, according to an investigative research report published Tuesday by Elliptic.
The blockchain analytics firm specializes in risk management and regulatory compliance. It said an overwhelming majority of pharmaceutical chemical companies it contacted in China that can ship precursors for fentanyl overseas accept cryptocurrencies as a form of payment.
Elliptic found that most of the chemical suppliers it identified used accounts at “three specific exchanges” based outside of China, which were unnamed in the report. The analytics firm said it had notified the exchanges being used by China-based drug suppliers, highlighting hundreds of wallets that had received more than $27 million worth of crypto assets.
Elliptic did not immediately respond to requests for comment from Decrypt.
Fentanyl, a synthetic opioid that’s cheap to produce and vastly more potent than heroin, has been linked to thousands of drug overdose deaths in the United States each year. In 2021, of the U.S.’s more than 106,000 drug overdose deaths, synthetic opioids were involved in around 70,600, according to research from the National Institutes of Health.
Fentanyl overdoses are also the leading cause of death among Americans aged 18 to 45 years old, Elliptic noted.
The analytics firm identified more than 80 China-based firms that offered to ship fentanyl precursors abroad in exchange for cryptocurrencies. One supplier told Elliptic that cryptocurrency was a popular payment method among its Mexico-based customers.
“They always use USDT or Bitcoin to pay,” Elliptic was told by the supplier, who referenced the stablecoin Tether by its ticker name. “It is no problem.”
Elliptic’s team of researchers encountered multiple suppliers that said they shipped fentanyl precursors and the drug itself to Mexico, where drug cartels can then traffic the drug into the U.S.
The analytics firm said it may be surprising to see China-based firms leveraging crypto exchange accounts. In 2019, China said it would begin restricting residents’ access to international exchanges as part of the country’s crypto crackdown.
That same year, the White House released a report that linked fentanyl trafficking to cryptocurrencies including Bitcoin, Ethereum, and Monero—the so-called “privacy coin” that’s become popular on dark web marketplaces.
The Trump administration’s report claimed that cryptocurrencies are the “predominant funding mechanisms associated with fentanyl trafficking.”