The New York State Department of Financial Services (NYDFS) is directing banking organizations under its jurisdiction to incorporate blockchain analysis technologies into their compliance programs.
The official announcement, dated September 17th, applies to New York-chartered banks and branches of international banking entities operating in the state. Superintendent Adrienne Harris indicated that this step reflects the growing integration of digital assets, affecting both customer interactions and internal virtual currency initiatives within banks.
The NYDFS initially issued guidance in April of 2022, requiring virtual currency firms licensed within the state to utilize blockchain analytics for tracking transactions and evaluating potential risks. This oversight was broadened in December 2022, with the introduction of a requirement for prior authorization for any new or substantially altered virtual currency-related activities.
As traditional banks increasingly participate in comparable activities, the regulatory body stated that these analytics tools are now crucial for screening customer digital wallets, validating the origins of funds, monitoring exposure to virtual asset service providers considered high-risk, and identifying instances of money laundering or breaches of sanctions regulations.
NYDFS clarified that this guidance is not a legally binding regulation, but rather a communicated expectation for supervision. Institutions are expected to customize their control measures to align with their specific risk tolerances and business models, while consistently re-evaluating these measures in response to the dynamic market landscape.
The regulator cautioned that the expanding utilization of digital assets heightens the susceptibility to illicit financial activities. “Regulated institutions have a vital responsibility in maintaining the integrity of the financial system,” the agency stated in its announcement.
This directive underscores New York’s position as having one of the most stringent regulatory frameworks for crypto-assets in the United States, which includes its BitLicense regime.
This is a developing story.
This article was generated with the assistance of AI and reviewed by editor Jeffrey Albus before publication.
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