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Mexican Cartels Paying Chinese Firms In Crypto For Fentanyl Supplies

Fentanyl overdoses have emerged as the leading cause of death among individuals aged 18 to 45 in the US, with China once serving as the primary source of this synthetic opioid. But in 2019, under mounting pressure from the US, the Chinese government took decisive action by implementing strict regulations that effectively banned the export of this fentanyl. 

However, the void left by China’s ban was quickly filled by Mexican drug cartels, who saw it as an opportunity to make substantial profits. The cartels started producing their own fentanyl using chemical ingredients imported from China, known as precursors.

Blockchain analysis firm Elliptic identified in a report on May 23 over 90 Chinese chemical companies that took part in supplying the precursors, offering cryptocurrency. as a primary payment method. 

“Our researchers received offers to supply large quantities of one particular fentanyl precursor. This chemical is not used in the manufacture of any other products, and is a controlled substance in most countries. However, it remains unregulated in China.“

– the Elliptic report says.

90% of precursor suppliers provided crypto wallet addresses for payment

Further in the report, Elliptic said that during the negotiations, the suppliers raised no concerns about how the precursors would be used after the sale, with some of them even praising them as the best-selling product that can be used to produce fentanyl. Other suppliers also talked about how they sold the opioid to customers from Mexico. The researchers asked the suppliers whether Mexico-based buyers paid in crypto, to which one responded: 

“They always use USDT or Bitcoin to pay. It is no problem.”

– the suppliers told Elliptic researchers.

In addition, 90% of China-based chemical manufacturers that agreed to supply the fentanyl ingredients to Elliptic offered a crypto wallet address to receive the payment. According to the analysis provider, Bitcoin (BTC) was the most popular means of payment by some distance, followed by Tether’s (USDT).

Finally, the research found that these crypto wallets received thousands of payments, with a total amount of more than $27 million, soaring 450% year-over-year. 

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