Chinese precursor manufacturers experience a 600 increase in crypto deposits in 2023
TRM Labs, a blockchain intelligence company, has reported that Chinese precursor manufacturers received more than $26 million in cryptocurrency in 2023, with approximately 60% of the payments being made in Bitcoin.
The use of cryptocurrency as a payment method by Chinese drug manufacturers seems to be increasing, as the amount of crypto deposited into wallets associated with these entities has increased sixfold from 2022 to 2023. TRM Labs, which is supported by JPMorgan Chase, Visa, Citi, and PayPal, among others, shared these findings in a recent research report.
According to the report, 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 cryptocurrency-denominated sales of drug precursors.”
The data shows that approximately 60% of cryptocurrency payments to Chinese precursor manufacturers were made on the Bitcoin blockchain, followed by 30% on the TRON blockchain, and around 6% on the Ethereum blockchain. Despite the increase in cryptocurrency payments, Chinese manufacturers are also open to accepting payments in fiat currencies through platforms like PayPal, MoneyGram, Western Union, and bank transfers.
TRM Labs’ study revealed that Chinese drug precursors primarily target Canada, the Netherlands, Australia, Germany, and the U.S. as their top shipping destinations. However, there are also advertisements targeting Russia and neighboring countries for mephedrone precursors.
In April, a U.S. congressional committee reported that China subsidizes the production of illicit fentanyl precursors, contributing to the opioid crisis in the U.S. The committee found that China offers value-added tax rebates to companies producing fentanyl analogs, precursors, and other synthetic narcotics, as long as they are sold outside of China.
Fentanyl, which is favored by drug cartels due to its lower production cost compared to heroin and its potency being 50 times stronger, is the leading cause of death for Americans aged 18-45, as noted by the blockchain intelligence firm Elliptic.
In another development, the U.S. Department of Justice indicted eight Chinese firms for using cryptocurrency in the fentanyl trade.
