A new report by blockchain forensics experts at Chainalysis traces the relationship between chemical manufacturers in China, drug cartels in Mexico, research chemical stores on the clearnet, and darknet markets — all via cryptocurrency transactions, and specifically how they apply to the production and distribution of fentanyl.
In conjunction with data provided by the US Drug Enforcement Agency (DEA) and Treasury Department, the report outlines the flow of funds from precursor suppliers to fentanyl synthesizer to distributors, all using transaction data collected from the Bitcoin, Bitcoin Cash and Ethereum blockchains.
According to Chainalysis, the movement of cryptocurrency related to the production and distribution of fentanyl mirrors geographic patterns outlined by the DEA as early as 2019. Taken together, both suggest that the “most common flow of fentanyl” involves the shipment of precursors from China to Central and South America where they are assembled into fentanyl, then packaged and smuggled into the US by Mexico-based cartels.
Value of sales from 2012 to 2023
Researchers started by identifying crypto addresses belonging to Chinese chemical shops known to accept crypto as a means of payment, some of which have already been sanctioned by the US government. From there, Chainalysis managed to unweave a web of crypto transactions that connected darknet market vendors, markets, research chemical stores, sanctioned individuals associated with such stores, drug testing services, private email services, and even crypto postage services.
Linkages to cartel activities were made by establishing a positive correlation between the value of crypto transactions from Latin America to Chinese chemical shops with the number of fentanyl busts made at the US-Mexico border the following month. Chainalysis found that a similar relationship did not exist with Canada and busts on the US northern border.
Although China is the biggest exporter of fentanyl precursors in the world, crypto-accepting chemical shops in India were also found to be responsible for shipping such chemicals to Mexico and Central America. North America was estimated to be the biggest importer of China-based chemicals, followed by Central & Western Europe, Central & Southern Asia, and Latin America.