New York’s financial regulator has extended blockchain analytics requirements from crypto firms to all state-chartered banks, forcing traditional institutions to adopt new monitoring tools as they expand into digital asset services.
The New York State Department of Financial Services (NYDFS) has directed banking organizations under its supervision to implement blockchain analytics tools as part of their compliance frameworks, marking the regulator’s latest step to strengthen oversight of cryptocurrency activities.
Superintendent Adrienne A. Harris issued the guidance on September 17, extending requirements previously applied only to licensed virtual currency entities to traditional banking institutions operating in New York. The directive affects all state-chartered banks and branches of foreign banking organizations licensed in the state.
“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 stated.
NYDFS Extends Crypto Compliance Rules to Traditional Banks
The guidance builds on existing NYDFS regulations established in April 2022, which required licensed virtual currency firms to employ blockchain analytics to trace transactions and assess risk. Since December 2022, New York banking organizations have been required to seek prior approval before engaging in new or significantly different virtual currency-related activities.
The regulator cited increasing bank exposure to digital assets through both customer activity and bank-led virtual currency initiatives as the rationale for extending these requirements.
Banks Must Deploy Blockchain Analytics for Multiple Compliance Functions
Banks are expected to use blockchain analytics tools, like Chainalysis, Elliptic or others, for several key functions, including screening customer wallets to assess risk exposure, verifying the source of incoming funds from virtual asset service providers, and monitoring exposure to money laundering, sanctions violations, or other criminal activities.
Additional applications include identifying and evaluating risks from third-party virtual asset service provider counterparties, comparing expected versus actual customer activity in virtual currency transactions, and weighing risks associated with new virtual currency products or services.
The department emphasized that institutions must tailor these controls to their individual risk appetite and business models, with regular reassessment required as market conditions evolve.
New York Reinforces Position as Strictest Crypto Regulator in US
The new guidance represents supervisory expectations rather than formal rulemaking, allowing institutions flexibility in implementation while establishing clear compliance standards. The regulator warned that growing adoption of digital assets increases the potential for illicit finance activities.
“Covered Institutions play a critical role in safeguarding the integrity of the financial ecosystem to prevent illicit activities like money laundering, terrorist financing, and sanctions evasion,” the department stated in its notice.
The directive underscores New York’s position as one of the strictest cryptocurrency oversight regimes in the United States, operating in tandem with its BitLicense framework. The state’s regulatory team includes more than 60 personnel with expertise in anti-money laundering laws, fraud prevention, and blockchain technology. This license is so strict that in 2025, only two companies, MoonPay and Bullish, received it.
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