DFS Superintendent Adrienne A. Harris Extends Blockchain Analytics Guidance to New York State Banking Organizations

DFS Superintendent Adrienne A. Harris Extends Blockchain Analytics Guidance to New York State Banking Organizations

New York State Department of Financial Services Superintendent Adrienne A. Harris today issued new guidance on the use of blockchain analytics tools for banking institutions contemplating or already conducting virtual currency-related activities. As banking institutions experience increasing interest in and exposure to virtual currency activities, blockchain analytics tools have the ability to enhance compliance programs and prevent illegal activities. Today's announcement builds upon previously released industry guidance to New York State-regulated virtual currency entities.

"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," said Superintendent Harris. "As a leader in the regulation of virtual currency, DFS will continue to set clear and transparent expectations for institutions, to protect consumers and safeguard market integrity, while also ensuring New York-regulated banking organizations can remain resilient and competitive."

Today's guidance seeks to make clear compliance expectations and encourage any entity in New York State seeking to commence or currently engaged in virtual currency-related activity to leverage new technology-driven control measures.

Given an increase in virtual currency adoption, New York State-regulated banking organizations are expected to consider incorporating blockchain analytics as an additional risk-management tool.  Applicable use cases may include:  

• Assessing risk exposure through customer wallet screening and funds verification involving virtual asset service providers ("VASPs");

• conducting holistic monitoring for illicit activity exposure and risk management of third parties;

• augmenting due diligence controls to evaluate expected versus actual activity, such as dollar thresholds, of customers engaging in virtual currency activity; and

• weighing the risks associated with a virtual currency product or service to be offered.

A copy of the guidance can be found on the Department's website.

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