At Hearing, Warren Calls for Closing Crypto Loopholes Fueling Fentanyl Trade

Hearing

Senator Elizabeth Warren: Fentanyl is fueling the most severe drug crisis our country has ever seen. In 2022 synthetic opioids like fentanyl were responsible for 75,000 deaths more than two-thirds of all drug overdose deaths last year. Fentanyl is now the leading cause of death among Americans 18 to 45.

China is the leading supplier of the chemical ingredients called precursors that drug cartels use to produce fentanyl and other synthetic opioids. China also plays a major role in laundering money for the cartels. Assistant Secretary Rosenberg, you are responsible for leading and coordinating anti-money laundering policy. Now, Treasury has caught a number of Chinese companies that were providing fentanyl precursors. Were any of these Chinese companies using cryptocurrency in their illegal drug transactions?

Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing and Financial Crimes, U.S. Department of the Treasury: Thank you senator for the question. Unfortunately, that is a mode that some of these precursor manufacturers and illicit drug organizations have used. The receipt of Bitcoin payments in wallets cryptocurrency wallets.

Senator Warren: Okay, so we're talking about these Chinese companies that are supplying the precursors to fentanyl and they're getting paid in cryptocurrency. And you have to ask why this would happen, because crypto is supposedly banned in China. But new research from the blockchain analytics firm Elliptic shows that more than 90 companies based in China are raking in tens of millions of dollars worth of crypto selling these fentanyl precursors. The number of crypto transactions associated with Chinese fentanyl brokers increased by 450 percent just last year alone. So Assistant Secretary Rosenberg, why are drug suppliers and cartels increasingly turning to crypto for large-scale drug sales and money laundering?

Assistant Secretary Rosenberg: Thank you senator for the question. The reason why they would find this appealing is the same reason that other financial criminals would find it appealing, which is to say there is an element of pseudonymity that they seek in using this kind of payment mechanism. Also, you're able to, unfortunately process, unfortunately for these purposes, process a large, a large number, a large value, financial value--

Senator Warren: Lots of dollars worth of transactions.

Assistant Secretary Rosenberg: Yes, of Bitcoin in this instance, a large amount of a high value of such currency across a national border. And if you can achieve a person-to-person transaction or decentralized transaction, then you're avoiding the kind of scrutiny, know-your-customer financial disclosure that you would get if you used a more traditional financial institution. So those anonymity-enhancing features are generally what financial criminals that you're noting here find attractive.

Senator Warren: Okay, so they're using crypto, this is their payment of choice. These fentanyl dealers, this is looking good for them.

Assistant Secretary Rosenberg: It is one, unfortunately, there are others but it is certainly one.

Senator Warren: This is one they're focused on here. So Elliptic's research found that these 90 Chinese suppliers sold enough, let's talk about the volume. This group sold enough precursor drugs in exchange for crypto to produce $54 billion worth of fentanyl pills. That is enough fentanyl to kill nearly 9 billion people, all paid for by crypto. When one of the companies was asked whether their Mexico-based customers paid in crypto, they replied that the cartels and I'm going to quote, always use Tether or Bitcoin to pay. It is no problem. Now the Office of National Drug Control Policy has identified crypto as quote, central to the rise of drug sales in the United States.

Senator Marshall and I believe that Congress has talked about fentanyl long enough. We propose to do something to fight back and that is why we are reintroducing our Digital Asset Anti-Money Laundering Act, which closes loopholes in our anti-money laundering rules and cuts off drugs suppliers and cartels from using crypto to fuel their illegal business. Assistant Secretary Rosenberg, will closing the holes in our anti-money laundering rules give regulators stronger tools to address crypto's use in fentanyl trade and at least help cut off payments from drug cartels to Chinese drug suppliers?

Assistant Secretary Rosenberg: Yes, I'm certain that will help and I hope that we will be able to encourage some of our foreign counterparts, other jurisdictions, to do the same which, would go a long way in helping as well.

Senator Warren: Thank you. Crypto is helping fund the fentanyl trade. And we have the power to shut that down. It's time. Thank you.

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