"Chinese Gang Laundering Black Money with Cryptocurrency... Also Payment for Fentanyl Drugs"

Reports have emerged that Chinese criminal organizations are laundering billions of dollars using cryptocurrency, including funds received from supplying drugs to the United States.

The Wall Street Journal (WSJ) reported on the 2nd (local time) that Chinese gangs are using cryptocurrency to launder profits gained from drug trafficking and illegal gambling.

[Photo by Reuters/ Yonhap]

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The U.S. blockchain analytics firm Chainalysis revealed in a report last year cryptocurrency wallet addresses linked to suspicious chemical trading groups based in China. It stated that approximately $37.8 million (about 50.5 billion KRW) worth of cryptocurrency had been received since 2018 as payment for shipping key ingredients of fentanyl. Cryptocurrency wallet addresses function like account numbers, allowing cryptocurrency to be sent and received through these addresses.

The main ingredients of fentanyl are known to be sent from China to Central America and Mexico. Drug cartel organizations in these regions reportedly use these ingredients to manufacture drugs. When criminal organizations conduct drug transactions, they need to launder so-called "black money," and they use cryptocurrency, which is difficult to trace, for this purpose.

Fentanyl, known as the 'zombie drug.'
Photo by AFP/Yonhap News

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The U.S. Department of the Treasury’s Office of Foreign Assets Control added 14 companies and 14 individuals to its sanctions list in October last year. They were accused of illegally manufacturing and distributing precursors for fentanyl, methamphetamine, and MDAA (a type of drug), as well as trafficking animal sedative xylazine, which is mixed with fentanyl.

At that time, the U.S. government believed that Mexican drug cartels purchased precursor substances from Chinese companies, then manufactured fentanyl and distributed it within the United States. Accordingly, the U.S. Department of the Treasury also sanctioned five companies and 12 individuals from China and Mexico in May of the same year.

China is also strongly responding to crimes involving cryptocurrency due to the increase in such offenses. In December last year, illegal foreign exchange traders attempting to transfer approximately $2.2 billion out of China using cryptocurrency were caught by authorities. China also uncovered blockchain-based funds amounting to about $4 billion. Chinese public security authorities view that the digital yuan is gradually settling into the market, with the total transaction volume reaching $250 billion in 2023.

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