The New York Department of Financial Services (NYDFS), the main regulator of digital currency firms in their state has issued new guidance to firms under its jurisdiction, encouraging them to use blockchain analytics services.
In the letter addressed to all virtual currency business entities licensed under New York’s banking law or “23 NYCRR Part 200,” the government agency highlighted the importance of blockchain analytics to customer due diligence, transaction monitoring, and sanctions screening.
NYDFS Superintendent Adrienne Harris wrote that digital currencies raise a lot of compliance challenges due to their unique nature and characteristics. Regardless, they also present new possibilities for control measures that leverage these new technologies, one of which includes blockchain analytics services.
Harris noted that blockchain analytics services are recommended as a best practice for virtual currency entities in New York.
“VC Entities can use third-party service providers or internally developed blockchain analytics products and services for additional control measures, whether separately or in combination,” she said.
The guidance is in response to a March directive from the office of Kathy Hochul, the governor of New York. Hochul implored the DFS to strengthen its enforcement of sanctions against Russia using measures including procurement of blockchain analytics tools.
New York’s controversial digital assets regulatory stance
While New York state has one of the most advanced regulatory regimes for the digital currency industry, it has also been embroiled in controversy.
Earlier this month, the state approved a new budget that gives the NYDFS additional oversight authorities over digital currency firms. The new powers allow the NYDFS to collect supervisory costs from licensed digital currency businesses.
The NYDFS’s regime with digital currency firms has, however, remained controversial. The procedures and requirements for obtaining a “BitLicense” from the regulator have been called out as a way to stifle the industry in the state.
Several firms have fled the state, and others, including Coinbase (NASDAQ: COIN), have had to limit their services in the state. Lobbyists have been fighting to have the licensing regime overhauled.
Similarly, the state’s legislature has passed a bill to ban proof of work (PoW) block reward mining. The bill, which was introduced earlier this year, gives PoW block reward miners a two-year moratorium to convert to renewable energy sources or leave the state.
The state’s lawmakers argue that PoW block reward mining, if left unchecked, will increase the state’s energy usage, as well as greenhouse gas emissions.
Watch: U.S. Congressman Patrick McHenry on Blockchain Policy Matters with Bitcoin Association’s Jimmy Nguyen
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