Despite this trend away from fentanyl sales on the dark web, four members of the US Congress this week reintroduced a bill called the Dark Web Interdiction Act to increase penalties for drug dealers on the dark web, with a particular focus on fentanyl. The bill would also strengthen the Joint Crime Task Force on Opioids and the Darknet that has helped coordinate law enforcement takedowns of hundreds of alleged dark web drug sellers and administrators in recent years.
But even as retail cryptocurrency trade on the dark web is restricted in fentanyl, and as law enforcement units crack down on what’s left of it, Elliptic’s research shows that cryptocurrency-based wholesale trade of fentanyl ingredients to drug cartels – who then manufacture synthetic opioids and smuggle them into the states The United States and other countries to sell in the physical world – continues. In its study of labs selling chemical precursors, Elliptic noted that several of the websites surveyed specifically indicated that they shipped to customers in Mexico, and also sold 17 off-the-shelf fentanyl and other more potent opioids.
Those Chinese chemical companies in some cases sell products other than fentanyl precursors, Elliptic’s Robinson notes, acknowledging that blockchain analysis cannot distinguish between those sales and sales of fentanyl ingredients. Some also sold precursors to amphetamines, methamphetamines, and other opiates. But Elliptic researchers saw companies advertising fentanyl precursors as their top selling products, in some cases. Robinson also notes that Elliptic doesn’t claim to have measured the entire crypto-based fentanyl supply chain, but only captured a “snapshot” of identifiable transactions. This indicates that his estimate of $27 million is likely less than the total amount of sales of fentanyl precursors over the past half decade.
The US government may be increasingly aware of the activity of sellers of fentanyl precursors in China and the role of cryptocurrency, but so far the US has acted on a much smaller scale than Elliptic Industry has revealed. Last month, the US Treasury Department sanctioned four Chinese men and two chemical laboratories, Wuhan Shukang Biotechnology and Suzhou Xiaoli Pharmatec, for selling fentanyl precursors to drug cartels in Mexico. Three of the men were also charged in absentia. The fourth, according to the Treasury announcement, was an associate who accepted cryptocurrency payments on behalf of one of the two companies.
The decision of Chinese chemical companies to accept cryptocurrency for sales of fentanyl ingredients may seem counterintuitive, given the ability of companies like Elliptic and other cryptocurrency trackers to track sales of dangerous and potentially illegal products via blockchains. But Robinson says Chinese companies are likely to use cryptocurrencies because they are harder to confiscate or ban — and they may not be particularly interested in tracking the money by Western companies and law enforcement as long as they can still find a cryptocurrency exchange willing to cash it. Outside. “If a company in China wants to accept crypto payments, no one can prevent that from happening,” says Robinson.
But traceability also creates an opportunity to pressure cryptocurrency exchanges into cutting accounts of sellers of fentanyl precursors identified by Elliptic. In fact, Elliptic has notified the exchange of hundreds of titles linked to Chinese chemical companies. “There is definitely a role for these services to clamp down on this,” says Robinson. Exploiting this cryptographic choke point could cut off at least a small part of the deadly flow of fentanyl around the world — not at its destination, but at its source.
