20-3-2025 – Blockchain analytics firm Chainalysis has documented direct cryptocurrency payment channels connecting Mexican drug cartels with Chinese manufacturers of fentanyl precursor chemicals.
The comprehensive report, published on Wednesday, demonstrates how cryptocurrency has become “increasingly interwoven into the illicit drug trade,” creating what researchers describe as an “on-chain fentanyl trade” encompassing a “broad array” of participants across continents. This digital financial ecosystem has effectively circumvented traditional banking oversight and international financial monitoring systems.
Despite China’s official prohibition on cryptocurrency transactions, Chinese chemical manufacturers remain the dominant global suppliers of fentanyl precursors, pill presses, and counterfeiting equipment. Chainalysis researchers documented substantial transactions linking these suppliers directly with Mexican criminal organisations—primarily the Sinaloa Cartel and Cartel Jalisco Nueva Generación—who purchase these materials to manufacture synthetic opioids destined for distribution across the United States.
Wisconsin case exposes operational mechanics
The financial connections were principally traced through a significant civil forfeiture case in Wisconsin that resulted in the seizure of $5.5 million in cryptocurrency assets. This legal action exposed the operational mechanics of how cartel-affiliated money launderers within the United States transferred funds directly to chemical manufacturers in China.
Chainalysis researchers noted that Chinese nationals, faced with strict capital controls that “prohibit buying more than $50,000 in foreign currency,” have increasingly turned to alternative financial instruments, including cryptocurrency and underground banking networks, to circumvent these restrictions.
Bulk cash-to-crypto pipelines” and operational priorities
The operational methodologies employed by these criminal networks prioritise transaction speed over security measures, according to the report. Cartel-affiliated operators were found to employ relatively unsophisticated cryptocurrency techniques, rapidly moving funds through centralised exchanges and unhosted wallets in patterns described as “straightforward but effective,” whilst inadvertently making their transactions more visible to investigative authorities.
Law enforcement officials have documented multiple components within this crypto-enabled supply chain, including Chinese manufacturers who openly advertise precursor chemicals online, postage services accepting cryptocurrency payments, and darknet marketplaces that facilitate transactions between parties.
To streamline these international payments, Mexican organisations have established what authorities characterise as “bulk cash-to-crypto pipelines”—sophisticated financial conversion operations designed to transform physical currency from drug sales into untraceable digital assets.
Substantial financial flows documented
The scale of these operations becomes apparent through transaction analysis conducted by Chainalysis. Between 2018 and 2023, a single network of suspected China-based chemical suppliers received in excess of $37.8 million through cryptocurrency payments—a figure that likely represents only a fraction of the total financial flows within this illicit ecosystem.
