A recent study conducted by TRM Labs has shed light on the slowing growth rate of crypto-denominated fentanyl sales in 2023. This revelation marks a significant decline from the average growth rate of 155% recorded since 2019. Examining data from over 100 online vendors of fentanyl and its precursors, TRM Labs discovered that these sales experienced a decrease to just under 60% during the first three quarters of 2023.
One potential explanation for this slowdown lies in the aggressive measures taken by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). Throughout 2023, OFAC has imposed sanctions on 82 individuals and entities associated with fentanyl production and distribution, surpassing the number of designations in previous years. These sanctions have targeted major players within the industry, including a China-based network involved in the manufacture and distribution of fentanyl precursors.
In October, OFAC further intensified its efforts by sanctioning entities affiliated with the Sinaloa Cartel, a significant drug trafficking organization. As a result, the Sinaloa Cartel declared a halt to its fentanyl production activities. The sanctions also affected multiple Mexican nationals and a major Chinese precursor manufacturer, Wuhan Shuokang Biological Technology Co., Ltd.
The Correlation Between Sanctions and Sales
TRM Labs’ analysis indicates a correlation between these major sanctions and a decline in online fentanyl sales involving cryptocurrency. Notably, sales volumes experienced significant drops in April and May, coinciding with the imposition of sanctions. A further decline occurred in October following the unprecedented designation of 28 individuals and entities. While it is challenging to attribute the decrease in crypto-related fentanyl sales solely to OFAC’s actions, there is no doubt that these sanctions disrupt supply chains and increase risks for those involved with targeted manufacturers.
It is important to note that the decrease in sales does not necessarily indicate a reduction in demand for fentanyl. This implies that new vendors may emerge to fulfill the gap left by those who have been sanctioned. However, these new players will undoubtedly face heightened scrutiny from U.S. and international law enforcement agencies.
The decline in crypto-denominated fentanyl sales in 2023 is a result of increasing sanctions imposed by the U.S. Department of the Treasury’s Office of Foreign Assets Control. These sanctions have disrupted supply chains and created additional risks for those engaged with targeted manufacturers. While the decrease in sales does not indicate a drop in demand, it does open up opportunities for new vendors to enter the market, albeit under intense scrutiny. As the fight against fentanyl continues, it is essential for authorities to remain vigilant and adaptable in their efforts to curb its production and distribution.
