Crypto Helps Fund Fentanyl Trade, Says Senator Elizabeth Warren, Calling For Strict Regulation

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By Anushree Dave

During a US Senate Banking Committee hearing on Wednesday, Senator Elizabeth Warren discussed the use of crypto to finance the opioid fentanyl trade between China and the United States.

“Fentanyl is a leading cause of death among Americans ages 18 to 45,” Warren said. “China is the main supplier of chemical ingredients called precursors…China also plays a major role in laundering money for cartels.”

In a question to Undersecretary of the Treasury Elizabeth Rosenberg, Warren asked if any of the vendors use cryptocurrency in illegal drug transactions, as cited in a recent report by blockchain firm Elliptic.

“Unfortunately, this is a mode that some of these precursor manufacturers have used,” Rosenberg said, referring specifically to bitcoin payments.

Rosenberg also pointed out that the reason they “would find it appealing is the same reason other financial criminals would find it appealing, which is that there’s an element of pseudonymity that they’re looking for.”

Rosenberg said crypto users in this context can avoid scrutiny, financial disclosure, and still get plenty of it across the border in peer-to-peer networks.

In the Elliptic report, researchers found that more than 80 China-based groups offered to provide fentanyl precursors in exchange for crypto, including bitcoin and tether. Wallets associated with these providers saw a 450% increase in the amount of payments received in the 12 months ending April 30.

Warren pointed out during the hearing that the study found that crypto payments to these wallets totaled enough to produce fentanyl pills with a market value of around $54 billion. Warren also lobbied for the Digital Assets Anti-Money Laundering Act, which was proposed in December 2022.

“Rogue nations, oligarchs, drug barons and human traffickers use digital assets to launder billions in stolen funds, evade sanctions and fund terrorism,” Warren said in a statement in December. “The bipartisan bill will help close the loopholes in crypto money laundering and strengthen enforcement to better protect U.S. national security.”

Critics of the law say it is the most direct attack on the personal freedom and privacy of cryptocurrency users and developers, but before the Senate Banking Committee on Wednesday, Rosenberg said that the law would help fight money laundering and illegal drug suppliers.

Senator Warren did not immediately respond to a request for further comment.

-Anushree Dave

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06-01-23 1617ET

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