Crypto-denominated Fentanyl Sales Growth Falls to Four-Year Low Following US Sanctions and Enforcement Actions

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Crypto-denominated Fentanyl Sales Growth Falls to Four-Year Low Following US Sanctions and Enforcement Actions

Following a multi-year boom, crypto-denominated fentanyl sales growth slowed to just under 60% for the first three quarters of 2023, according to research by TRM Labs spanning over 100 online vendors of fentanyl and fentanyl precursors. This marks a significant drop in the growth rate, which had averaged 155% since 2019.

The declining growth rates appear to correlate with a series of actions by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which sanctioned several large producers of fentanyl precursors – chemicals that, while often not themselves illegal, can easily be mixed together to create the deadly drug.

In 2023, OFAC has so far sanctioned a record 82 individuals and entities linked to fentanyl production and distribution via 11 designation events. These events follow a steady increase in designation activity since 2018, with five individuals and entities designated in 2019, seven in 2020, 15 in 2021 and 17 in 2022.

In a sweeping crackdown in early October, OFAC sanctioned a China-based network that manufactured and distributed precursors for fentanyl, methamphetamine and MDMA. This action followed the sanctioning of several affiliates of Mexico’s notorious Sinaloa Cartel, including Mario Alberto Jimenez Castro, who was accused of using crypto to launder proceeds from drug sales. The cartel subsequently announced it would halt fentanyl production, reportedly in response to US pressure.

Other large-scale designations took place in April, when OFAC sanctioned the Wuhan Shuokang Biological Technology Co., Ltd, a major precursor manufacturer, alongside several of the firm’s principals. February saw the sanctioning of six Mexican nationals who supplied precursor chemicals to Sinaloa-controlled fentanyl “super labs.”

TRM analysis found an apparent correlation between major sanctions events and dips in online fentanyl sales involving cryptocurrency (TRM does not collect data for non-crypto sales of the drug, which are estimated to be much higher).

As shown in the above chart, volumes dropped in line with sanctions in April and May. And while trade rebounded in August despite some sanctions in July, it began to fall with additional sanctions in September before plunging in October, when OFAC designated an unprecedented 28 individuals and entities.

It is impossible to ascribe any one cause to the decreased crypto-related fentanyl sales in 2023: other events, such as indictments by the US Department of Justice (DOJ), may have also contributed to the trend. However, OFAC’s actions are likely to have disrupted supplies by increasing the risks of engaging with targeted precursor manufacturers. Even as the mostly China-based entities are unlikely to face censure from Beijing, which does not generally cooperate with US law enforcement, international buyers will be aware that any dealings with sanctioned entities would attract the attention of US authorities.

With no sign of decreased demand, new vendors and platforms are likely to replace at least some of those that were sanctioned. However, they will be facing ever-growing pressure from US and international law enforcement. And while it remains too early to tell how long this year’s dip in growth will continue, any dent to fentanyl sales – even if temporary – can reduce the total number of lives lost to this devastating drug.

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