Crypto helps fund fentanyl trade, says Sen. Elizabeth Warren, calling for strict regulation

By Anushree Dave

In a U.S. Senate Banking Committee hearing on Wednesday, Senator Elizabeth Warren brought up the use of crypto to fund trade in the opioid fentanyl between China and the United States.

"Fentanyl is among the leading causes of death among Americans 18 to 45," said Warren. "China is the leading supplier of chemical ingredients called precursors...China also plays a major role in laundering money for cartels."

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

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

Rosenberg also pointed out that the reason why they "would find this appealing is the same reason that other financial criminals would find this appealing, which is to say there's an element of pseudonymity they seek."

Rosenberg said that crypto users in this context can avoid scrutiny, financial disclosure, and still get a large amount 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 supply fentanyl precursors in exchange for crypto, including bitcoin and tether . The wallets associated with these suppliers saw a 450% increase in the amount of payments received in the 12 months ending April 30th.

Warren highlighted in the hearing that the study found that crypto payments to these wallets totaled enough to produce fentanyl pills with a street value of approximately $54 billion. Warren also pushed for the Digital Asset Anti-Money Laundering Act, which was proposed in December 2022.

"Rogue nations, oligarchs, drug lords, and human traffickers are using digital assets to launder billions in stolen funds, evade sanctions, and finance terrorism," said Warren, in a statement in December. "The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better safeguard U.S. national security."

Critics of the act say that it is the most direct attack on the personal freedom and privacy of cryptocurrency users and developers, but in the Senate Banking Committee on Wednesday, Rosenberg said the act would help curb 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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