Crypto Transactions Link Chinese Fentanyl Suppliers to Mexican Cartels: Chainalysis

Blockchain analytics firm Chainalysis has uncovered direct financial connections between Mexican drug cartels and Chinese fentanyl precursor suppliers through crypto transactions.

Crypto has become “increasingly interwoven into the illicit drug trade,” Chainalysis researchers stated in their report on Wednesday analyzing the transactions.

The “on-chain fentanyl trade” includes a “broad array” of players, Chainalysis claims.

The connection was tracked primarily through a civil forfeiture case in Wisconsin that resulted in the seizure of $5.5 million in crypto, exposing how cartel-affiliated money launderers in the U.S. transferred funds directly to Chinese chemical manufacturers.

Despite China’s ban on crypto, Chinese manufacturers remain the primary source of fentanyl precursors, pill presses, and counterfeiting equipment worldwide, with documented transactions showing Mexican cartels as primary buyers.

The report cites how Chinese nationals are “prohibited from buying more than $50,000 in foreign currency” and resorts to using alternative financial instruments such as crypto and underground banking networks to evade capital controls.

Transactions tracked by Chainalysis revealed that cartel-affiliated networks operated with relatively unsophisticated crypto techniques, moving funds swiftly through centralized exchanges and unhosted wallets. 

The operational pattern prioritized speed over security, making the transactions “straightforward but effective” while also rendering them more visible to investigators.

Chainalysis further claims Mexican organizations, primarily the Sinaloa Cartel and Cartel Jalisco Nueva Generación, purchase these precursors to manufacture synthetic opioids, including fentanyl, for U.S. distribution.

The cartels establish what authorities describe as “bulk cash-to-crypto pipelines” to facilitate payments.

Law enforcement officials have identified multiple components in this crypto-enabled supply chain, including Chinese precursor manufacturers who openly advertise online, postage services accepting crypto, and darknet markets that facilitate transactions.

Between 2018 and 2023, one group of suspected China-based chemical traders received more than $37.8 million in payments made through crypto, Chainalysis cited in its report referencing past data.

Edited by Sebastian Sinclair