May 30, 2024

Warren, Cassidy in Bipartisan Letter, Highlight Role of Crypto in Fentanyl Trafficking

Seek Update on Administration’s Efforts to Combat Illicit use of Crypto in Drug Markets

“A 2021 Government Accountability Office (GAO) study found that crypto has ‘been central to the rise of drug sales in the U.S., specifically fentanyl and other synthetic opioids.’”

Text of Letter (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.) and Bill Cassidy (R-La.) wrote to the White House Office of National Drug Control Policy (ONDCP) and the Drug Enforcement Administration (DEA) seeking an update on the Biden Administration’s actions to crack down on drug traffickers’ exploitation of crypto to grow their business and launder money. 

Cryptocurrency has played an increasingly important role in the global fentanyl trade over the last decade,  facilitating the manufacturing and trafficking of fentanyl – and making it easier for cartels to launder their funds. The bad actors running this network are drawn to crypto because of its anonymity, speed of money transfers, and ease of use for cross-border transactions. 

Fentanyl has been illegally manufactured and distributed through secret drug markets in the form of fake and dangerous tablets, resembling commonly misused prescription medicines or other illicit drugs. The number of overdose deaths in the U.S. from opioids has dramatically increased in recent years, rising nearly four-fold from about 21,000 in 2010 to more than 81,800 deaths in 2022. 

The manufacturing of fentanyl involves a global network that relies on chemical substances known as precursors. These precursors typically originate outside of the United States, with China as the leading producer of fentanyl precursors. Drug cartels based in Mexico then use the precursors to manufacture their own fentanyl to be sold in the United States. Chinese financial firms have been found to play an important role in laundering Mexican cartels’ funds.

A 2021 Government Accountability Office (GAO) study found that crypto has “been central to the rise of drug sales in the U.S., specifically fentanyl and other synthetic opioids.” In September 2022, the Biden Administration announced new steps to strengthen anti-money laundering enforcement in the crypto ecosystem in recognition that “digital assets have facilitated the rise of ransomware cybercriminals; narcotics sales and money laundering for drug trafficking organizations; and the funding of activities of rogue regimes.”  

In response to the growing use of crypto in the illicit drug trade, the DEA, the Treasury Department, the Department of Justice (DOJ), and other federal agencies have implemented initiatives to combat the use of crypto in drug trafficking. For example, in April 2023, Treasury sanctioned multiple individuals and businesses in China for supplying fentanyl precursors to drug cartels in Mexico for the production of fentanyl. In October 2023, the Department of Justice announced the indictment of eight companies based in China with crimes related to the production of fentanyl and methamphetamine, the distribution of synthetic opioids, and the sale of precursor chemicals.  

The senators are requesting an update on the DEA’s and ONDCP’s efforts to stop bad actors’ use of crypto for drug trafficking, including their current assessments of crypto’s role in illegal drug trafficking, specific actions taken to combat the crisis, and any new initiatives planned by the Administration in the coming year. 

Senator Warren is an outspoken advocate for regulation and oversight of crypto to rein in unchecked illegal activity and protect consumers, the financial system, and national security:

  • In April 2024, Senators Warren and Cassidy (R-La.) pressed the Department of Justice and the Department of Homeland Security for the information needed to begin addressing the use of cryptocurrency in the illegal trade of child sexual abuse material (CSAM). 
  • In April 2024, Senator Warren wrote to Secretary of the Treasury Janet Yellen, expressing the need for any new cryptocurrency legislation to include the full suite of anti-money laundering (AML) authorities that the Treasury Department (Treasury) requested in a November 2023 letter to Congress. 
  • In April 2024, at a hearing of the Senate Committee on Banking, Housing, and Urban Affairs, Senator Warren asked Deputy Secretary Adeyemo about gaps in AML rules that allow sanctioned entities like Iran to earn revenue processing crypto transactions, highlighting that validators, middlemen between the payer and receiver in crypto transactions, are not subject to the same AML rules as the traditional banking industry. 
  • In April 2024, Senator Warren wrote to the House Financial Services Committee Chair Patrick McHenry (R-N.C.) and Ranking Member Maxine Waters (D-Calif.) urging them to include strong rules that protect consumers, financial stability, and our national security in any upcoming legislation related to stablecoins. 
  • In December 2023, Senator Warren sent letters to three crypto giants: the Blockchain Association, Coin Center, and Coinbase, asking each about their use of the revolving door to undermine efforts to rein in crypto’s use in terrorist financing.
  • In December 2023, Senator Warren announced an expanded coalition of Senate support for the bipartisan Digital Asset Anti-Money Laundering Act. Senators Raphael Warnock (D-Ga.), Laphonza Butler (D-Calif.), Chris Van Hollen (D-Md.), all members of the Senate Banking, Housing, and Urban Affairs Committee, and Senators John Hickenlooper (D-Colo.) and Ben Ray Luján (D-N.M.) joined the bill as cosponsors. 
  • In December 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren questioned Big Bank CEOs, who agreed on the need to apply anti-money laundering rules to crypto companies to protect national security. 
  • In October 2023, Senators Warren and Marshall and Representative Sean Casten (D-Ill.) led 102 lawmakers in a bipartisan letter to National Security Advisor Jake Sullivan and Brian Nelson, Under Secretary for Terrorism and Financial Intelligence at the Department of the Treasury raising grave concerns about reports that in the months leading up to their brutal October 7th terrorist attack on Israel, Hamas and Palestinian Islamic Jihad raised millions of dollars via crypto, evading U.S. sanctions to fund their operations.
  • In October 2023, at a hearing of the Senate Armed Services Committee, Senator Warren spoke about the need to crack down threats posed by crypto, noting that half of North Korea’s missile program is paid for through crypto crime.
  • In September 2023, Senators Warren, Roger Marshall (R-Kan.), Joe Manchin (D-W.Va.), and Lindsey Graham (R-S.C.) announced an expanded coalition of Senate support for their bipartisan Digital Asset Anti-Money Laundering Act, announcing 11 new cosponsors of their legislation – Senators Peters, Dick Durbin (D-Ill.), Chair of the Senate Judiciary Committee, Smith, King, Shaheen, Bob Casey (D-Pa.), Blumenthal, Bennet, Cortez Masto, Fetterman, and Whitehouse.
  • In July 2023, Senator Warren, along with Senators Marshall, Manchin, and Graham reintroduced the Digital Asset Anti-Money Laundering Act, legislation that would mitigate the risks that digital assets pose to our national security by closing loopholes and bringing the digital asset ecosystem into greater compliance with the anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks governing the greater financial system.
  • In July 2023, at a hearing, Senator Warren warned about the national security risks of rogue states using crypto to evade sanctions and fund their weapons programs, spying, and cyberattacks – calling out North Korea for stealing over $3 billion in crypto over the past 5 years, and using proceeds to fund its illegal nuclear weapons program,
  • In May 2023, a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called out crypto’s role in fueling the fentanyl crisis and announced she will reintroduce her bipartisan Digital Asset Anti-Money Laundering Act, a bill that would close loopholes in anti-money laundering rules, cutting off drug suppliers and cartels from using crypto to facilitate their illegal business. 
  • In May 2023, at a hearing of the Senate Armed Services Committee, Senator Warren questioned senior intelligence officials about crypto’s threats to national security as the method of choice for countries to evade sanctions and fund weapons programs, support spying, and promote cyber attacks.
  • In February 2023, at a hearing of the Senate Committee on Banking, Housing, and Urban Affairs, Senator Warren raised concerns that key parts of the crypto industry are not subject to the same money laundering laws that cover other financial organizations, allowing financial criminals to use crypto to launder billions. 
  • On December 14, 2022, Senators Warren and Marshall introduced the Digital Asset Anti-Money Laundering Act of 2022, bipartisan legislation that would mitigate the risks that crypto and other digital assets pose to US national security by closing loopholes in the existing anti-money laundering and countering of the financing of terrorism framework and bring the digital asset ecosystem into greater compliance with the rules that govern the rest of the financial system.
  • In September 2022, Senator Warren sent a letter to Treasury Secretary Janet Yellen calling on the Treasury Department and the Financial Stability Oversight Council to build a strong regulatory framework for the crypto market.
  • In March 2022, Senators Warren, Reed, Warner, and Tester introduced the Digital Asset Sanctions Compliance Enhancement Act to ensure that Vladimir Putin and Russian elites don't use digital assets to undermine the international community’s economic sanctions against Russia following its invasion of Ukraine.
  • In March 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren highlighted the various crypto tools that could make it easier for sanctioned individuals to hide their wealth and lessen the impact of Russian sanctions.
  • In March 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren warned that crypto may allow Russia to dodge sanctions and urged stronger regulation of the crypto market to ensure that countries, drug traffickers, cyber criminals, and tax cheats can’t evade economic pain.
  • In March 2022, Senators Warren, Warner, Reed, and Brown sent a letter to Treasury Secretary Janet Yellen, asking about the Treasury Department’s plans to enforce sanctions-compliance guidance for the crypto industry to ensure that economic sanctions remain an effective tool for achieving foreign policy goals.

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