New York Regulator Tells Banks to Use Blockchain Tools to Manage Crypto Risks

New York Urges Banks to Use Blockchain Tools for Crypto Risks

New York’s top financial regulator has advised banks to make more use of blockchain analytics when dealing with virtual currencies.

In a letter sent on September 17, the Department of Financial Services (DFS) said these tools can help banks detect money laundering, sanctions violations, and other illegal activities.

Adrienne Harris, the DFS Superintendent, explained that blockchain analytics are already helping licensed crypto companies and should also be used by banks—whether they handle crypto directly or through their customers.

DFS first gave guidance on blockchain analytics in April 2022 for licensed crypto firms. But now, as more banks show interest in crypto, regulators want similar protections in place.

The regulator suggested banks use blockchain tools to:

• Check customer wallets and the source of crypto funds.
• Monitor activity across the digital asset market.
• Review business partners such as crypto service providers.
• Compare expected vs. actual transactions.
• Assess risks before launching new crypto products.

DFS emphasized that banks should adapt these controls to their own risk levels and keep compliance systems updated as technology and markets change.

The notice stated: “Emerging technologies bring new threats that need new tools.” It added that blockchain analytics can help protect the financial system from risks like terrorist financing and sanctions evasion.

This guidance doesn’t change existing laws but shows regulators are pushing traditional banks to meet the same high standards already required of licensed crypto companies.