CHINA CHEMICAL FIRMS ‘TAKE CRYPTO PAYMENTS’

Blockchain analytics firm says more than 90 suppliers are selling narcotic fentanyl ingredients and earning millions in bitcoin and stablecoin Tether

Chinese chemicals companies suspected of supplying the base substances to produce fentanyl to overseas drug cartels have earned tens of millions of dollars in cryptocurrencies, according to two blockchain research firms, highlighting the criminal use of digital assets despite Beijing’s ban.

Elliptic, a London-based blockchain analytics firm, said in a report published yesterday that it had identified more than 90 China-based chemicals companies that were willing to sell them fentanyl precursors and to take cryptocurrencies as a payment method.

The cryptocurrency wallets used by these companies have received thousands of payments over the past few years, totalling more than US$27 million, according to the firm. The most popular crypto token accepted by these suppliers was bitcoin, followed by the stablecoin Tether (USDT), Elliptic said in the report.

In a separate report also published yesterday, blockchain research firm Chainalysis said crypto addresses associated with China-based sellers of precursor chemicals used to make fentanyl, a powerful narcotic that had become part of a widespread opioid crisis in the US, had received more than US$37.8 million worth of cryptocurrency since 2018.

The findings show that despite the Chinese government’s sweeping ban on cryptocurrency transactions in the country, some citizens were still finding ways to secure and use digital assets, sometimes through means that were illegal even beyond China’s shores.

Earlier this month, some Chinese internet users were reportedly purchasing biometric data from Cambodia and some African countries to use Worldcoin, a cryptocurrency project launched by Sam Altman, founder of Microsoft-backed start-up OpenAI, which developed the viral chatbot ChatGPT.

Worldcoin is not available in China. Worldcoin acknowledged the incidents in response to a report by blockchain-focused news outlet The Block, but said that the problem was confined to “a few hundred instances”.

The collapse of crypto exchange FTX last year also offered a glimpse into crypto usage in China. Mainland users of the exchange made up 8 per cent of the company’s customer base, according to an FTX bankruptcy filing in November.

Last month, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions on two Chinese companies that had allegedly supplied precursor chemicals to drug cartels in Mexico for the production of fentanyl intended for the US.

Both companies accepted bitcoin for purchases, according to the OFAC.

In response, Wang Wenbin, spokesman for the Chinese foreign ministry, said that the so-called fentanyl precursors were ordinary chemicals, and the US itself was to blame for the country’s opioid crisis, according to a report by state media outlet Xinhua.

“China, in the spirit of humanitarianism, has been trying to help the US as best it can,” Wang said.