China identifies the use of cryptocurrencies in drug trafficking as a new phenomenon

A new report has highlighted the Chinese government’s recognition of the new threat that cryptocurrencies pose to facilitating drug trafficking.

2021 Report Claims Government Identified Shift In Drug Money Flow From Online Bank Transfers To Crypto As A New Phenomenon, Chinese Media nncc626 reported on June 23.

China, which has become one of the main countries hostile to cryptocurrencies, claimed that drug dealers are also taking advantage of in-game currency to facilitate illicit trade. In general, authorities noted that drug trafficking is increasingly moving online as perpetrators look for ways to beat the system.

“The drug market continues to expand online, with increased use of money and drug distribution and person-to-person transaction models. <…> Drug capital transfers expand from online bank transfers to virtual currency and game currency; Drug delivery is done through “bulk logistics and small deliveries,” the report reads.

The crackdown on cryptocurrencies in China

The use of cryptocurrencies to facilitate drug trafficking likely acted as a catalyst for the Chinese government’s push to ban cryptocurrencies. Notably, in 2021, the state banned cryptocurrency-related activities, including mining and trading, citing that the sector poses a threat to financial stability.

Most of the traffickers are attracted to cryptocurrencies mainly due to the anonymous nature which minimizes the chances of getting caught.

Despite increasing government crackdowns, an earlier report revealed that Chinese cryptocurrency addresses transacted more than $2.2 billion worth of crypto to addresses linked to illicit activities between April 2019 and June 2021.

Crypto converts to fiat through decentralized exchanges

The acquired cryptocurrencies are converted into fiat money mainly with the help of decentralized exchanges. For example, Binance, the world’s leading cryptocurrency exchange, was allegedly used as a conduit to launder over $2.3 billion of illicit money.

Before the crackdown, drug traffickers from other parts of the world allegedly worked with Chinese money launderers through cryptocurrencies to facilitate the purchase of drug-making chemicals.

As reported by Finbold, drug traffickers are increasingly adopting new cryptocurrencies to facilitate vices like drug trafficking. In this case, the meme cryptocurrency Dogecoin is emerging as an alternative to Bitcoin and the privacy-focused Monero token.


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