Introduction
In September 2023, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) confirmed the involvement of the Sinaloa Cartel in cryptocurrency transactions. During the same timeframe, illicit Chinese drug labs reportedly received over $26 million in digital currencies. This amount surged into the tens of millions, doubling in the first part of 2024.
A recent article by CoinPaper delves into the increasing acceptance of digital currencies in illegal activities, analyzing money laundering operations orchestrated by drug traffickers, while also presenting an opportunity for the U.S. to bolster its bitcoin reserves.
The Rise of Cryptocurrencies in Illicit Activities
Since the inception of blockchain technology, its applications have spanned various domains, including nefarious uses by criminal enterprises. The advent of Silk Road, an infamous online marketplace, was pivotal in showcasing the benefits of cryptocurrencies to illicit actors. Despite the marketplace’s closure a decade ago, cryptocurrencies gradually began to integrate into mainstream finance, with their prevalence in drug trafficking expanding significantly.
The situation took a significant turn in April 2019 when Mexican law enforcement arrested Ignacio Santoyo, an alleged trafficker tied to a prostitution ring across Latin America. His arrest highlighted the use of bitcoin for laundering illicit proceeds, a trend that gained momentum in 2020 when reports indicated that numerous cartels were utilizing digital assets in their financial operations.
Case Studies and Investigations
This year also saw the DEA launch operations targeting the peer-to-peer platform LocalBitcoins, uncovering a network through which cash was converted into cryptocurrency through various exchanges.
In a notable case, the DEA tracked transactions from Carlos Fong Echavarría, who claimed that the cash he received was generated from family businesses. The investigation revealed complex money trails linking drug sales to various cryptocurrency transactions amounting to millions of dollars. Reports indicate that in 2021, Fong made around $42 million in purchases and $38 million in sales through cryptocurrencies, with a significant portion funneled into laundering efforts.
Continued Rise in Criminal Use of Cryptocurrencies
By 2023, further assessments flagged the Sinaloa Cartel and the Jalisco New Generation Cartel for prominently using digital currencies in their financial schemes. Following this trend, the U.S. Department of Justice charged seven individuals in April 2023, accusing Mario Alberto Jimenez Castro of orchestrating a money laundering operation that involved converting cash into cryptocurrencies for the Chapitos faction of the Sinaloa Cartel. His assets, including a linked Ethereum wallet, were subsequently sanctioned by OFAC after accumulating over $740,000 in deposits.
The Evolving Landscape of Drug Trafficking
These criminal organizations are now utilizing cryptocurrencies for extensive money laundering activities and supply chain payments, directly cooperating with Chinese manufacturers supplying precursors for synthetic drugs. Reports from TRM Labs indicate a dramatic increase—by 600%—in profits during 2023 for Chinese manufacturers dealing in cryptocurrencies, with over 60% of transactions taking place in bitcoin.
Moreover, criminal networks have become more sophisticated. Unlike the centralized structure exemplified by Pablo Escobar’s Medellín cartel, modern cartels like Sinaloa operate without a single leader. Instead, they function as cooperative networks, enabling rapid adaptability in response to law enforcement disruptions while maintaining diversified income streams.
Global Operations and Government Response
Currently, Sinaloa maintains operations in 47 countries and profits significantly from synthetic drug sales globally. Cartels are known to use legal exports, such as avocados, to launder drug profits through legal channels. In January 2025, the U.S. government escalated responses against these cartels, designating them as terrorists, which allows freezing of assets and potential international military operations.
Tensions between Mexico and the U.S. have risen as the U.S. administration pushes for stronger measures against cartels. As of mid-2025, Mexican authorities reported a significant drop in chemical trafficking, coinciding with increased seizures of fentanyl at the U.S. border. However, the constant evolution of these networks reveals their inherent resilience, suggesting that overcoming them will continue to be a complex challenge as these organizations remain pivotal in the drug economy, presently generating annual revenues estimated at $50 to $70 billion.
