US Department of Justice Says Chinese Companies Used Crypto to Faciliate Fentanyl Trade

The U.S. Department of Justice (DOJ) has intensified its efforts against Chinese businesses involved in the production and trafficking of fentanyl, a powerful synthetic opioid linked to a significant number of overdose deaths in the United States.

In the latest crackdown, the DOJ targeted a network of 28 businesses and individuals operating in Florida. The charges extend beyond fentanyl production to include methamphetamine production and the sale of precursor chemicals integral to the illegal drug trade.

Cryptocurrency plays a pivotal role in this illicit network, with the DOJ highlighting the use of cryptocurrency transactions to conceal the identities and financial movements of the accused.

The connection between crypto and the fentanyl trade has become a subject of concern, prompting calls for legislative action. Senator Elizabeth Warren, a prominent critic of digital assets, has been particularly vocal about the need for new laws to curb the use of cryptocurrency in facilitating drug trafficking.

The U.S. Treasury's Office of Foreign Assets Control (OFAC) joined the enforcement action by imposing sanctions on Chinese nationals allegedly associated with the illegal fentanyl operations. The OFAC identified 16 cryptocurrency wallets linked to these individuals and entities. Deputy Treasury Secretary Wally Adeyemo emphasised the significance of blocking these wallets, which had received millions of USD in funds through numerous deposits, underscoring the scale of the targeted operation.

This enforcement action aligns with broader efforts to disrupt the global fentanyl supply chain, which often originates with chemical companies in China. Attorney General Merrick Garland emphasised the U.S. government's commitment to dismantling every link in the chain responsible for supplying fentanyl, ultimately leading to fatal consequences in American communities.

The involvement of cryptocurrency in the drug trade is not a new phenomenon. The Silk Road, an online marketplace founded by Ross Ulbricht, facilitated drug transactions using digital assets and recently marked its 10th year with Ulbricht serving a prison sentence. The recent actions against Chinese businesses echo previous efforts, including a June crackdown on Chinese fentanyl companies. The use of cryptocurrency in these illegal activities was also highlighted by the blockchain analysis firm Elliptic in May 2023.

The Treasury's sanctions extend beyond individuals to include specific cryptocurrency addresses associated with the illegal operations. Bitcoin, Ethereum, Tether, and Tron are among the cryptocurrencies targeted by the OFAC. Notably, the sanctions list includes 19 cryptocurrency addresses, with a focus on five individuals connected to companies involved in the fentanyl and drug trade. One company, Valerian Labs in Vancouver, Canada, also faces sanctions.

While the enforcement action seeks to disrupt the fentanyl supply chain and hold individuals accountable, Senator Elizabeth Warren's legislative approach to address the issue stands out. Warren's proposed digital asset anti-money laundering bill aims to uncover illegal money laundering activities and promote Know Your Customer (KYC) rules for crypto participants. This legislative approach is viewed as a potential means to address the challenges posed by cryptocurrency in combating the illegal drug trade.