Guidance On Risks Related To Cryptocurrency

New York State’s Department of Financial Services has issued new guidance for controlling risks related to cryptocurrency, including money laundering and other illicit activity. According to the guidance, because financial activity involving virtual currency (VC) can involve different sources, destinations, and types of funds flows than are found in fiat-currency companies must be sure that their compliance programs take into account those unique characteristics. However, those same characteristics also present new possibilities for control measures that leverage new technologies. Laurel Loomis Rimon, a partner at Paul Hastings, says the guidance “sets new explicit transaction monitoring standards that differ from those that apply to traditional financial institutions. Regulators expect exchanges to monitor direct and indirect exposure to illicit activity through blockchain analytics and provenance tracing. For firms already using blockchain analytics technology, DFS’s guidance formalizes expectations about how those services should be utilized, whether provided in-house or by third-party blockchain analytics firms. For companies without blockchain analytics on board, the guidance is a mandate.”