NYDFS Mandates Blockchain Analytics for New York Banks’ Compliance

The New York State Department of Financial Services (NYDFS) has mandated that banking organizations implement blockchain analytics tools to enhance compliance with cryptocurrency activities.

On September 17, Superintendent Adrienne A. Harris extended requirements to traditional banks, previously applicable only to licensed virtual currency entities.
This directive impacts all state-chartered banks and branches of foreign banking organizations in New York.

Key Compliance Expectations

Banks must use blockchain analytics for:
- Screening customer wallets for risk exposure
- Verifying the source of incoming funds
- Monitoring for money laundering and sanctions violations
Additional functions include assessing risks from third-party providers and comparing expected versus actual customer activity in virtual currency transactions.
Institutions should tailor controls according to their risk appetite and reassess them as market conditions change.

Reinforcement of Strict Regulatory Framework

The guidance sets supervisory expectations, not formal rules, allowing flexibility but establishing clear standards.
NYDFS emphasizes the role of institutions in preventing illicit activities like money laundering and terrorist financing.
New York maintains its position as a strict crypto regulator through its BitLicense framework.
The state's regulatory team includes over 60 experts in anti-money laundering, fraud prevention, and blockchain technology.

New York's stringent oversight aims to safeguard the financial system's integrity amidst rising digital asset adoption.