New York Requires Banks to Implement Blockchain Analysis Tools to Combat Cryptocurrency-related Crime
The New York State Department of Financial Services (NYDFS), which oversees financial regulation in New York, now requires banks to incorporate blockchain analytics into their compliance systems to address heightened risks arising from virtual currency transactions. This requirement, announced on September 17, 2025, responds to the increasing involvement of banks in digital assets and expands upon earlier directives for regulated crypto firms. The move highlights the need for conventional banks to upgrade their compliance measures to prevent money laundering, sanctions violations, and other illegal activities.
Superintendent Adrienne Harris made it clear that as banks venture further into virtual asset services, adopting advanced technologies is crucial for risk mitigation. The new guidance specifically instructs banks to use blockchain analytics for screening customer wallets, confirming the origins of funds from virtual asset service providers, and tracking risk exposure. Financial institutions are also expected to customize their risk-management strategies based on their business operations and to periodically review them in response to market changes.
The NYDFS pointed out that blockchain analytics deliver practical insights, similar to tools already utilized by licensed crypto entities. Banks should compare clients’ anticipated behavior with their actual transactions and evaluate risks linked to new crypto offerings. The agency clarified that this guidance does not constitute formal regulation, but rather reflects supervisory expectations, reinforcing NYDFS’s commitment to fostering a strong compliance environment for digital assets.
This directive is part of NYDFS’s broader initiative to safeguard New York’s financial sector and update oversight of both conventional and digital financial services. Alongside blockchain monitoring, the department is enforcing tougher cybersecurity measures. All covered institutions must adhere to the revised New York cybersecurity regulations by November 1, 2025, which include a requirement for multi-factor authentication (MFA) to access internal systems. The MFA provision, which was first updated in 2023, is intended to lower the chances of data breaches and credential theft.
The use of blockchain analytics for regulatory purposes is expanding beyond New York. For example, in March 2025, Chainalysis uncovered connections between Mexican drug cartels and Chinese suppliers of fentanyl ingredients, tracing more than $37.8 million in suspicious crypto transactions between 2018 and 2023. This example illustrates the growing reliance on blockchain analytics to investigate criminal behavior, particularly in international transactions that are challenging to follow using traditional investigative techniques.
In another notable incident, Greece’s Anti-Money Laundering Authority utilized Chainalysis tools to freeze assets tied to the $1.5 billion Bybit hack, which was linked to North Korea’s Lazarus Group. Nearly a third of the stolen funds can still be tracked, demonstrating blockchain analytics’ effectiveness in unraveling complex laundering schemes. These cases reflect a global shift toward using advanced technologies by regulators and law enforcement to tackle crimes involving digital currencies.
The NYDFS directive is also in step with wider initiatives to improve oversight of stablecoins and other digital assets. For instance, in July 2025, the U.S. Treasury imposed sanctions on Russia’s Aeza Group after Chainalysis traced a TRON wallet to ransomware actors and darknet merchants. Meanwhile,
As international regulatory approaches to digital assets continue to diverge, different regions are adopting distinct strategies. In the U.S., the GENIUS Act primarily targets stablecoins, imposing strict standards for foreign stablecoins wishing to enter the U.S. market. In comparison, the European Union’s Markets in Crypto-Assets (MiCA) regulation presents a more comprehensive approach, covering most crypto assets and service providers. Both regulatory systems focus on consumer protection and financial stability, with MiCA offering an EU-wide operational passport and the GENIUS Act providing a dual federal-state regulatory framework for U.S. stablecoins.
NYDFS’s decision to require blockchain analytics marks a pivotal advancement in adapting regulatory practices to the realities of fast-changing financial technologies. As digital currencies become further embedded in banking, effective risk monitoring and mitigation will remain a top concern. By implementing blockchain analytics, New York continues to assert its leadership in financial regulation within the United States, creating a standard that other states and regions may follow.
