As traditional banks increase their involvement with digital assets, the NYDFS now wants to modernize oversight and combat illicit activities such as money laundering and sanctions evasion.
The New York State Department of Financial Services (NYDFS) has issued new guidance requiring banks to integrate blockchain analytics into their compliance programs, marking its latest step in tightening oversight of digital assets.
In a notice released on Wednesday, Superintendent Adrienne Harris directed all New York banking organizations, including branches of foreign banks, to adopt blockchain monitoring tools to address emerging risks tied to virtual currency activities.
The move follows an uptick in digital asset exposure across the banking sector and builds on earlier guidance issued to licensed crypto businesses in 2022.
“As traditional banking institutions expand into virtual currency activities, their compliance functions must adapt, onboarding new tools and technologies to mitigate new and different risks,” Harris said.
The department’s letter highlights how blockchain analytics can provide actionable intelligence similar to what is already used by licensed virtual currency companies.
Banks are expected to use these tools to screen customer wallets, verify the source of funds from virtual asset service providers, and monitor exposure to potential money laundering, sanctions violations, or other illicit activity.
They are also advised to compare customers’ expected activity with their actual transactions and assess risks tied to new crypto services or products.
The regulator stressed that these examples are not exhaustive and that banks must tailor their risk-management frameworks to their business models and reassess them regularly.
The guidance notes that the adoption of blockchain analytics is critical as institutions increasingly engage with virtual assets through customer activity or their own operations.
NYDFS framed the directive as part of its broader strategy to protect the state’s financial system.
In parallel with blockchain oversight, NYDFS is also phasing in enhanced cybersecurity rules.
On September 12, the department stated that “protecting New Yorkers starts with protecting New York’s financial system,” the regulator said, strengthening its cybersecurity requirements.
By November 1, 2025, banks and other covered entities must comply with updated provisions of New York’s landmark cybersecurity regulation, which mandates multi-factor authentication (MFA) for anyone accessing internal systems.
The MFA rule, first amended in 2023, is designed to reduce the risk of credential-based attacks and data breaches in the financial sector.
