Killer decentralisation

In September 2023 the OFAC officially acknowledged the Sinaloa cartel’s use of cryptocurrencies. That same year, China’s largest underground labs producing drug precursors received more than $26 million in digital assets. In the first four months of 2024, the volume doubled.

This ForkLog feature explores how crypto is being adopted across the black economy, the laundering playbooks of drug cartels, and how the United States could top up its bitcoin reserve.

Black-market mass adoption

As with any new technology, people use blockchains with a variety of aims and intentions.

Built with a love of freedom, the Silk Road darknet marketplace introduced the criminal world to the virtues of cryptocurrencies. A decade after its shutdown, digital assets began to integrate into the global financial system. The black market moved first: data indicate rapid growth in the use of bitcoin, stablecoins and altcoins in the drug trade.

In April 2019 Mexican police arrested alleged human trafficker Ignacio Santoe after his name was tied to a prostitution network spanning Latin America.

The arrest was made possible thanks to the use of bitcoin to launder criminal proceeds, once Mexico imposed controls on crypto operations.

The year 2020 brought a string of reports about cartels weaving digital assets into criminal schemes. The arrests of traffickers and their “financial advisers” also punctured the myth of blockchain anonymity.

That same year the DEA operation kicked off on the peer-to-peer platform LocalBitcoins. Several informants interacted with one Carlos Fong Echavarría, offering to swap cryptocurrency for cash. The Mexico-born suspect with alleged criminal ties said the cash came from family restaurants and animal farms.

DEA tracked suspected cash couriers via an undercover agent who worked directly with Fong Echavarría. The money trail was reconstructed to the moment of drug sales with the help of Binance. The exchange’s management provided the agency with information on 75 transactions totalling $4.7 million.

Funds hit a CEX wallet controlled by the suspect, after which the “cleaning” continued. In 2021 the account holder made 146 crypto purchases worth about $42 million and 117 sales worth $38 million.

A year later the UN stated that the Jalisco New Generation Cartel and Sinaloa increasingly consider bitcoin payments a way to launder money.

Chinese synthetics, tariff-free

On September 26, 2023, OFAC imposed sanctions on nine individuals, including members and fugitives linked to the Los Chapitos faction from Mexico’s Sinaloa state. The organisation is responsible for a significant share of illicit fentanyl and other narcotics shipments to the United States.

In April 2023 the U.S. Department of Justice charged seven suspects on a wide range of counts. Among them was Mario Alberto Jimenez Castro, who ran a crypto-enabled money-laundering scheme for the cartel leadership. He instructed couriers in the U.S. on how to collect cash proceeds and convert them into digital assets to pay Chapitos members directly and reinvest in fentanyl production.

OFAC added an Ethereum wallet linked to Jimenez Castro to its sanctions list. From March 2022 to February 2023 it received more than $740,000. It was the first formal acknowledgement of a Mexican cartel’s use of cryptocurrencies.

Digital assets are now woven through the drug business, used both for laundering and throughout the supply chain. The Sinaloa cartel uses them to settle with Chinese producers of synthetic substances.

Chinese precursor producers supply the global trade in synthetic drugs. According to TRM Labs, nearly two-thirds of fentanyl-precursor vendors also offer at least one precursor for mephedrone, MDMA and synthetic cannabinoids, targeting Canada, the Netherlands, Australia, Germany and the United States.

In 2023 those producers took in 600% more in cryptocurrency than the year before. In 2024, volumes doubled again in just the first four months.

As of September 2024 about 60% of crypto payments to producers were made in bitcoin, roughly 30% ran over the TRON blockchain and 6% over Ethereum. Of 120 precursor labs across 26 cities and 16 provinces, 97% accept cryptocurrency.

China’s shadow banks are deeply embedded in the United States’ “alternative financial system” and play a major role in cartel schemes. Capital controls on international transfers for Chinese citizens are exploited in the laundering process.

According to the Los Angeles Times, the Sinaloa cartel chose an organisation based in the San Gabriel Valley because it charged only 0.5–2% of laundered sums, unlike traditional networks that take 5–10%. In comments to the paper, former DEA chief Anne Milgram said the San Gabriel Valley group also collected a fee from wealthy Chinese citizens who bought dollars from Sinaloa.

To move more than $50,000 a year abroad for real-estate purchases, investments or tuition, a person turns to a broker in California. The intermediary then arranges for drug proceeds to be handed to a U.S. resident — usually in cash or as a series of “structured” deposits. In turn, the client transfers money to a domestic producer that ships consumer goods (electronics and clothing) or chemicals used to make synthetic drugs.

In 2023, more than $170,000 was sent via cryptocurrency ATMs in the United States to Chinese precursor producers.

A distributed Escobar

Where Pablo Escobar’s Medellín cartel was rigidly centralised and authoritarian, later generations of Latin American criminal organisations learned to manage themselves more deftly.

Decisions were taken collectively by vote, and if one member of the leadership was arrested, others assumed their duties. In constant confrontation with law enforcement, the network had no single point of failure and resembled a blockchain. For every shuttered supply route, several others emerged. If authorities squeezed the fentanyl flow, the cartel could temporarily pivot to marijuana or cocaine.

According to a report by the DEA, the Jalisco cartel operates in more than 40 countries on a franchise business model.

The organisation is led by Rubén “El Mencho” Oseguera Cervantes and a small group of senior commanders who report directly to him. The second tier comprises regional and “plaza” bosses who control specific territories.

The franchise model allows each group to tailor its activities to a speciality such as running clandestine methamphetamine labs — provided they:

• comply with standards on name, brand and organisational structure;
• follow the general guidance issued by the Jalisco cartel’s leadership.

The model also allows rapid expansion because opening new “franchises” requires minimal outlay. Its weak spot: groups operating under the Jalisco brand can strike their own alliances with other criminal organisations.

The other giant, Sinaloa, has no single leader. Instead it functions as an umbrella for four distinct but cooperating criminal organisations.

This structure lets the leaders of independent groups:

• share resources — such as smuggling routes, corrupt contacts, access to illicit chemical suppliers and laundering networks;
• avoid sharing profits or submitting to a single chain of command.

The four principal groupings are led by:

• “Los Chapitos” — the four sons of Joaquín “El Chapo” Guzmán Loera, Sinaloa’s former boss, now serving life in a U.S. prison;
• Ismael “El Mayo” Zambada García — more than 30 years at the helm;
• Aureliano “El Guano” Guzmán Loera — El Chapo’s brother;
• Rafael Caro Quintero — founder of the now-defunct Guadalajara cartel.

Sinaloa operates in at least 47 countries. It ships methamphetamine and cocaine to Thailand as well as Europe, Australia and New Zealand, where prices are several times higher than in the United States.

In many Central and South American countries it maintains permanent representatives who coordinate cocaine shipments, secure imports of precursors and disguise the true origin of cargoes en route to Mexico.

Mexican syndicates also use African countries as transit hubs for cocaine bound for Europe. The most recent recorded case came in June 2023, when Mozambican police arrested several people building a drug lab. Among them were two Mexicans who, investigators say, were hired by the Sinaloa cartel for that purpose.

Over time, criminal organisations have built alternative economies. A simple example is the global popularisation of avocados and limes.

The scheme is simple. Mexicans export two consignments at once: through illicit channels, drugs; and in parallel, local legal goods. The profit from the first, black transaction is booked to the second. Thus avocados and limes spread worldwide and their production became lucrative. Even today, some retailers refuse to sell Mexican avocados because of the product’s link to the drug trade.

Trump versus the cartels 

In January 2025 U.S. president Donald Trump issued an order designating six Mexican cartels (including Sinaloa and Jalisco New Generation) as “Foreign Terrorist Organizations” and “global terrorists”. 

This allows their assets to be frozen, financial operations to be blocked, and provides a legal basis for potential involvement by special services and intelligence — even for kinetic operations on Mexican soil.

In May Trump offered Mexico’s president, Claudia Sheinbaum, to deploy U.S. troops to wage war on the cartels. Sheinbaum refused, citing fear of intervention and the need to protect sovereignty. Her response to U.S. calls for the “total elimination” of the cartels was crystal clear: “Mexico must solve the problem of organized crime on its own.”

Tensions between the countries rose amid the White House’s hard-line use of force against migrants and protesters opposing mass deportations.

In June Mexico reported a roughly 40% drop in chemical precursors flowing to the United States since Trump took office in early January 2025. Meanwhile, according to U.S. border authorities, about 345 kg of fentanyl was seized at the southern border in April, 1% less than a month earlier.

The DEA reported that in April 2025 alone 22.2 million pills and roughly 1,400 kg of fentanyl powder were seized — the equivalent of about 119 million potentially lethal doses.

In May, the largest seizure in DEA history netted 2.7 million pills; 16 people were arrested, including a leader with direct ties to Sinaloa.

Cartels are states within states, only distributed. They are fiendishly difficult to defeat; at best, the threat can be partially contained.

And amid such intense confrontation, a quick, reliable way has emerged to top up the bitcoin reserve and concentrate vast extra capital. By various estimates, Mexico’s cartels turn over roughly $50–70 billion a year — comparable to major sectors of the economy.