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.
Banks Told to Screen Wallets and Track Crypto Risk in NYDFS Directive
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.
Together, the measures underline NYDFS’s push to modernize oversight of both traditional and digital financial services.
Regulators see blockchain analytics as a necessary tool to detect illicit finance while MFA requirements strengthen defenses against cyber intrusions.
With virtual currency adoption growing, New York is signaling that banks must take a more proactive role in safeguarding the integrity of the financial system.
Blockchain Analytics Emerges as Key Tool Against Crypto Crime
The role of blockchain analytics in uncovering criminal activity has grown increasingly central as illicit use of digital assets expands.
In March, Chainalysis revealed direct financial links between Mexican drug cartels and Chinese suppliers of fentanyl precursors, exposing more than $37.8 million in suspicious crypto transactions between 2018 and 2023.
Investigators said the use of cryptocurrency allowed chemical traders to move funds across borders without physical interactions, forming part of a wider underground network spanning China, Mexico, and the United States.
That same capability has been critical in tracking cybercrime. In July, Greece’s Anti-Money Laundering Authority achieved its first-ever cryptocurrency asset seizure, freezing funds tied to the $1.5 billion Bybit exchange hack attributed to North Korea’s Lazarus Group.
Using Chainalysis Reactor tools, authorities traced stolen funds through complex laundering layers and confirmed links to wallets used in the February 2025 breach.
Nearly one-third of the stolen assets remain traceable, investigators said.
Private-sector players are also expanding oversight. Tether announced a new investment in Crystal Intelligence, a blockchain analytics firm used by regulators and law enforcement to identify illicit transactions.
The partnership builds on their joint Scam Alert platform, launched earlier this year, which flags wallet addresses connected to fraud, hacks, and phishing schemes.
Meanwhile, the U.S. Treasury sanctioned Russia’s Aeza Group in July, freezing a TRON wallet holding over $350,000 after Chainalysis tied it to ransomware operators and darknet vendors.
The enforcement push comes as crypto-related fraud continues to climb. The FBI reported $9.3 billion in crypto losses in 2024, most from investment schemes.
CertiK data shows that over $2.2 billion was lost in the first half of 2025, with wallet breaches and phishing scams driving the surge.
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