Mexican Cartels Use Bitcoin to Buy Fentanyl Ingredients From China: US Treasury Report

A person under the influence of drugs in the Tenderloin District of San Francisco, Calif., on May 16, 2024. John Fredricks/The Epoch Times

Criminal groups in Mexico are using cryptocurrencies like Bitcoin to pay for ingredients used to manufacture fentanyl, revealed a recent report by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) bureau.

Mexico-based transnational criminal organizations (TCOs) buy fentanyl precursor chemicals and manufacturing equipment mostly from companies in China (PRC), the June 20 report said. The criminal organizations use the items to synthesize fentanyl and other opioids in Mexico, then sell them in the United States.

The Mexican groups are “increasingly purchasing” chemicals and equipment in “virtual currency, including bitcoin, ether, monero, and tether, among others,” the report stated. “Virtual currency payments are often sent to persons affiliated with PRC-based suppliers or secondary money transmitters with hosted wallets at virtual asset service providers.”

The Mexican cartels smuggle the fentanyl across the U.S. border in multiple forms—as powder, an adulterant in other drugs, or encapsulated in counterfeit medications. They are sold to American citizens through various channels, including mail delivery from ecommerce marketplaces, person-to-person drug sales, and in-person deliveries arranged via social media platforms.

In 2023 alone, the U.S. Drug Enforcement Administration (DEA) seized more than 80 million counterfeit prescription pills laced with fentanyl and almost 12,000 pounds of fentanyl powder. This is equal to over 381 million lethal fentanyl doses. This year so far, the agency said it has seized fentanyl equivalent to 174 million doses of 2 mg each, an amount the DEA said could be lethal.

Last year, the U.S. Customs and Border Protection (CBP) seized nearly 550,000 pounds of illicit drugs, which included over 27,000 pounds of fentanyl.

CBP’s fentanyl seizures surged more than 860 percent between fiscal years 2019 and 2023. Seizures almost doubled from fiscal year 2022 to 2023.

According to the U.S. Centers for Disease Control and Prevention (CDC), fentanyl accounts for almost 70 percent of overdose deaths in the country. In 2023, an estimated 107,543 people died of drug overdoses. Fentanyl was linked to 74,702 of these deaths.

In addition to cryptocurrencies, the Mexican criminal groups use bank transfers, money services businesses (MSB), and online payment processors to buy fentanyl precursors and manufacturing equipment.

These transactions may be sent from Mexico or the United States to individuals and shell companies linked to a Chinese supplier or chemical broker.

“While some money transfers are sent from TCOs in Mexico to PRC-based suppliers without crossing the U.S. financial system, many of these foreign transactions are cleared in U.S. dollars through U.S. correspondent banks, Mexico- and PRC-based agents of U.S. MSBs, and U.S. online payment processors,” the report said.

China is the main source of fentanyl entering America. The DEA says 97 percent of illicit fentanyl comes into the country from entities operating in China.

Crypto and Fentanyl

A May 2023 report by blockchain analysis firm Elliptic said Chinese businesses involved in the fentanyl pandemic were receiving “tens of millions in crypto payments.”

The company’s research team identified over 90 chemical companies from China that were willing to supply fentanyl precursors and accepted cryptocurrencies as payment.

Of these firms, “90 percent provided a cryptocurrency wallet address for payment. Bitcoin was by far the most popular cryptocurrency, followed by Tether, the US dollar stablecoin,” the report said.

“Elliptic’s blockchain analysis tools show that these wallets have received thousands of cryptocurrency payments, totaling just over $27 million,“ it continued. ”The number of crypto payments to these chemical suppliers has increased by 450 percent year-on-year.”

The company said it was surprising that many Chinese businesses were willing to accept cryptocurrency payments despite the communist government’s anti-crypto policy. The Chinese regime has banned cryptoasset exchanges from operating in the country.

Although overseas exchanges are barred from serving Chinese residents, the chemical suppliers were using exchanges outside of China. This could suggest that these businesses were using intermediaries to convert the crypto assets into local Chinese currency, Elliptic speculated.

In October, the Justice Department announced eight indictments against chemical manufacturers based in China and their employees for crimes related to fentanyl production.

Two Chinese individuals allegedly maintained cryptocurrency wallets to receive payments for precursor chemicals.

Another two people linked to the Du Transnational Criminal Organization also maintained a crypto wallet each to accept payment for sales made by a Wuhan-based pharma company.

“Fentanyl is the deadliest drug threat facing the United States. Not only is fentanyl 50 times more potent than heroin and 100 times more potent than morphine, a dose of as little as two milligrams can kill a grown adult,” the department said.