The New York State Department of Financial Services (NYDFS) has announced a new directive mandating that banks integrate blockchain analytics into their compliance programs. This initiative is part of a broader effort to enhance oversight of digital assets in light of the increasing involvement of traditional banking institutions in virtual currency activities.
In a recent notice, Superintendent Adrienne Harris outlined that all banking organizations operating in New York, including foreign bank branches, must adopt blockchain monitoring tools. This approach aims to address the evolving risks associated with digital assets and follows previous guidance issued to licensed cryptocurrency companies in 2022. As traditional banks expand into virtual currencies, Harris emphasized the necessity for these institutions to adapt their compliance measures, incorporating new technologies to manage the distinct risks linked to digital assets.
The directive underscores the capability of blockchain analytics to provide actionable intelligence akin to that utilized by licensed virtual currency businesses. It mandates that banks utilize these tools to screen customer wallets, verify the source of funds from virtual asset service providers, and monitor exposure related to potential money laundering, sanctions violations, or other illicit activities. Banks are also instructed to compare expected customer activity with actual transaction behavior and evaluate risks associated with new cryptocurrency services or products.
Notably, this directive is not exhaustive. The NYDFS encourages banks to tailor their risk management frameworks according to their specific business models and to conduct regular reassessments. The adoption of blockchain analytics is deemed essential as banks increasingly engage with virtual assets through customer interactions and their own operations.
In addition to blockchain oversight, the NYDFS is implementing stricter cybersecurity regulations. By November 1, 2025, financial institutions must comply with enhanced provisions of New York’s cybersecurity regulations, which include a requirement for multi-factor authentication (MFA) for anyone accessing internal systems. Originally amended in 2023, the MFA rule aims to mitigate risks associated with credential-based attacks and potential data breaches in the financial sector.
These coordinated measures highlight NYDFS’s commitment to modernizing its oversight of both traditional and digital financial services. Regulators believe blockchain analytics is instrumental in detecting illegal financial activities, while the MFA requirement fortifies defenses against cyber threats. Given the rising adoption of virtual currencies, New York is signaling that banks must take an assertive stance in protecting the integrity of the financial system.
The significance of blockchain analytics in combating crypto-related crimes has become increasingly prominent. Recent findings by Chainalysis revealed direct financial connections between Mexican drug cartels and Chinese suppliers of fentanyl precursors involving over $37.8 million in suspicious cryptocurrency transactions spanning from 2018 to 2023. Cryptocurrency’s ability to facilitate cross-border transactions has become a tool for illegal trade, further necessitating robust monitoring frameworks.
Law enforcement agencies, in collaboration with blockchain analytic firms, have achieved significant milestones in tracking cybercrime. A notable instance is Greece’s Anti-Money Laundering Authority, which successfully executed its first cryptocurrency asset seizure linked to the $1.5 billion Bybit exchange hack, attributed to North Korea’s Lazarus Group. Utilizing Chainalysis tools, authorities traced the stolen funds through intricate laundering pathways, confirming connections to wallets used in the exploit.
The private sector is also stepping up its oversight. Tether recently announced an investment in Crystal Intelligence, a blockchain analytics firm dedicated to identifying illegal transactions. This partnership enhances their Scam Alert platform, designed to flag wallet addresses associated with fraud and phishing efforts.
Additionally, the U.S. Treasury has taken action against ransomware operators, sanctioning Russia’s Aeza Group and freezing a TRON wallet containing over $350,000 after a Chainalysis investigation linked it to illegal activities on the darknet.
As fraud related to cryptocurrencies continues to rise, with the FBI reporting $9.3 billion in losses from investment schemes in 2024 and CertiK noting over $2.2 billion lost in the first half of 2025, the need for robust compliance and monitoring systems becomes increasingly critical.
