Fentanyl use is now a leading cause of death in the US for those aged 18 to 49, according to the Department of Justice, and the crisis is growing at an alarming rate. In just a decade, synthetic opioids have come to dominate the market. Senator Elizabeth Warren recently said crypto is “helping fund the fentanyl trade” and has proposed a Digital Asset Money Laundering Act.
The Drug Enforcement Administration (DEA) seized over 57.5m fentanyl-laced, fake prescription pills and 13,740 pounds of fentanyl powder in 2022, while the Biden administration said it has called on Congress to make a $46.1bn investment in National Drug Control Program agencies.
“Fentanyl is the single deadliest drug threat our nation has ever encountered.”
Anne Milgram, DEA Administrator
The DEA has identified China as the primary source of fentanyl and fentanyl-related substances. In 2019 China agreed to implement measures including investigations of known fentanyl manufacturing areas, stricter control of internet sites advertising fentanyl, stricter enforcement of shipping regulations, and the creation of special teams to investigate leads on fentanyl trafficking.
“Fentanyl is the single deadliest drug threat our nation has ever encountered,” DEA Administrator Anne Milgram, said. “Fentanyl is everywhere.”
Alarming figures
Research by blockchain analytics company Elliptic found a majority of Chinese companies were willing to supply the chemicals that make fentanyl in return for cryptocurrency payments.
Some 27 of the suppliers in the Hebei province are centred in Shijiazhuang, 180 miles southwest of Beijing and known as the “medicine hub of China”. Wuhan, in Hubei province, comes in second with 20 suppliers.
Number of suppliers in Chinese provinces
Regarding the use of cryptocurrency as a form of payment for these substances, Elliptic found that wallets have received thousands of cryptocurrency payments, totalling just over $27m, while the number of crypto payments to these chemical suppliers has increased by 450% year-on-year.
The markup is astronomical. According to Elliptic, $27m could purchase enough of the precursor to produce fentanyl pills with a street value of $54bn. A variety of cryptocurrencies were used as the payment method, with bitcoin used in 66% of cases.
Growth in the number of payments received by fentanyl precursor suppliers since 2021
“We’re trying to shine a light by identifying these crypto wallets and making them public,” said Elliptic Chief Legal Officer John Melican. “Crypto can be used to help in the war against fentanyl and opioids.”
The exact volume of payments made using crypto as a percentage of overall transaction is unknown, due to lack of available comprehensive data. But the report said: “The power of blockchain data allows us to penetrate these supply chains and relationships between darknet markets, suppliers and vendors in a way that is simply not possible when dealing with fiat, lifting a lid on part of that deadly trade in ways that aren’t always conventionally possible.”
“I don’t think crypto is driving the market. Regulation that exists in the fiat world designed to prevent this is probably working as best it can, but there are still gaps in it and challenges preventing any drug trade in fiat as well as if they were taking crypto,” Melican said.