Blockchain analytics company Elliptic: Chinese pharmaceutical companies accepting cryptocurrency fuel illegal drug exports to the United States

The blockchain analytics company Elliptic stated that several chemical companies in China are accepting cryptocurrency payments to export illicit drug ingredients to Mexico, fueling the production of illegal painkillers entering the United States.

US Takes Action to Stop Illegal Drug Imports from China and Mexico

Fentanyl, a painkiller, is 50 to 100 times more potent than morphine. It is a Schedule II controlled substance in Taiwan. In April of this year, the White House announced a strong crackdown on illegal supply chains of Fentanyl. According to the DEA, in 2021, 71,000 people in the U.S. died from Fentanyl abuse, accounting for two-thirds of drug overdose deaths in the country. The DEA assesses that most of the Fentanyl trafficked into the U.S. comes from two Mexican drug cartels, whose labs use precursor chemicals from China. The U.S. Treasury's Office of Foreign Assets Control (OFAC) has previously sanctioned specific companies and individuals in China and Mexico in April.

Elliptic, a blockchain analytics company, stated that China has been a major source of illegal Fentanyl in the past years. However, under pressure from the U.S. in 2019, the Chinese government began regulating the export of the drug.

However, Foreign Policy magazine believes that due to deteriorating U.S.-China relations, China's willingness to cooperate with the U.S. on drug enforcement has decreased.

The U.S. is now working to block the pattern of "China provides the raw materials, Mexico manufactures, and the illegal drugs enter the U.S."

China, Mexico Trading with Cryptocurrencies: USDT, BTC

Elliptic stated that the OFAC sanctions also listed crypto wallets used by these Chinese companies for receiving payments. Elliptic found that over 90 Chinese chemical companies are willing to provide precursor chemicals for Fentanyl and accept cryptocurrencies as payment. These chemicals are not commonly used in the production of other drugs and are controlled substances in most countries, but not regulated in China.

During interviews with Chinese chemical companies, Elliptic encountered individuals who mentioned that these chemicals are their best-selling products, used to produce Fentanyl, and even sold to Mexican clients who always pay with USDT or BTC.

An investigation revealed thousands of cryptocurrency transactions totaling over $27 million.

China Unable to Ban Cryptocurrencies, Illegal Drug Dealers' Funds in Exchanges

Despite China's opposition to cryptocurrencies, many companies are still willing to accept crypto payments.

Elliptic stated that most chemical suppliers accepting cryptocurrencies use accounts on exchanges located outside China, concentrated in three specific exchanges. This may indicate that these companies may use intermediaries to help convert cryptocurrency payments into Chinese Yuan.

Elliptic has informed the exchanges used by these companies and has tagged hundreds of cryptocurrency addresses associated with these activities to prevent cryptocurrencies from being used in these illicit and deadly transactions.