What happened?
The New York State Department of Financial Services (NYDFS) has issued new guidance directing all banking organizations to incorporate blockchain analytics into their compliance programs. This move is designed to address emerging risks linked with virtual currency activities. Part of this directive includes the requirement for banks to use these tools to screen customer wallets, ascertain the source of funds from virtual asset service providers, and keep an eye out for potential money laundering or other illicit activities.
Who does this affect?
All banking institutions in New York, including branches of foreign banks operating within the state, will be affected by this new regulation. As these traditional institutions extend their reach into virtual currency operations, they are required to adapt their compliance functions accordingly. Utilizing new tools and technologies, like blockchain analytics, will be integral to this adaptation process and the mitigation of different types of risks.
Why does this matter?
This development holds significant importance given the increasing engagement of institutions with virtual assets through customer activity or their own operations. With continuous growth in virtual currency adoption, New York’s directive signifies that banks must actively participate in safeguarding the integrity of the financial system. Additionally, the integration of analytics can help uncover and prevent illicit financial activities, supporting the market stability and investor protection.