ALBANY, N.Y.—The New York State Department of Financial Services on Wednesday ordered banking institutions to deploy blockchain analytics to help detect and prevent illicit activity, citing rising engagement with digital assets, The Block reported.
The directive builds on 2022 guidance that first urged state-registered firms to adopt blockchain tools.
"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 NYDFS Superintendent Adrienne Harris in a statement.
NYDFS urged FIs to use blockchain analytics when assessing customer wallets for potential risks, evaluating digital asset products under consideration, and in other relevant scenarios, The Block said.
"Emerging technologies introduce new and evolving threats that require new tools, such as blockchain analytics, with enhanced capabilities to aid risk identification and mitigation," NYDFS said. "With increasing virtual currency adoption, 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."
Earlier on Wednesday, NYDFS issued a BitLicense and Money Transmission License to crypto market infrastructure and information services firm Bullish, The Block noted.