Blockchain Compliance Tools

🔐 Balancing Privacy and Compliance in Blockchain? Meet REGKYC 🔍 I highly recommend reading this recent paper: “REGKYC: Supporting Privacy and Compliance Enforcement for KYC in Blockchains” KYC and AML compliance have long been sticking points for blockchain adoption in regulated environments. This paper presents REGKYC, a privacy-preserving Attribute-Based Access Control (ABAC) framework designed to reconcile user privacy with regulatory enforcement. 💡 Key Contributions: ✅ Structured ABAC model for flexible KYC attribute verification 🔐 Preserves user privacy while enabling regulatory compliance 🧩 Allows CASPs to tailor policies to evolving jurisdictional requirements 🕵️♂️ Enables authorized deanonymization in the event of malicious activity REGKYC offers a compelling vision for compliant and privacy-preserving DeFi — an area that’s becoming increasingly important as institutions and regulators engage with blockchain ecosystems. 📘 Worth a read if you're exploring the future of on-chain compliance, ZK-based privacy, or regulatory frameworks in crypto. Kudos to the authors for a thoughtful and timely contribution! 👏 William Knottenbelt Michael Huth Xihan X. Let me know if you're working on anything similar — happy to connect and exchange ideas.

Yesterday, my former office, NYS DFS, issued new industry guidance on the use of blockchain analytics tools for banking institutions. According to DFS, “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.“ According to the Guidance, all NYS regulated banking entities 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.” The new Guidance can be found here: https://lnkd.in/eipamg-N

"𝗨𝗻𝗹𝗼𝗰𝗸𝗶𝗻𝗴 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲: 𝗘𝗥𝗖-𝟯𝟲𝟰𝟯 𝗣𝗶𝗼𝗻𝗲𝗲𝗿𝘀 𝗥𝗪𝗔 𝗧𝗼𝗸𝗲𝗻𝗶𝘇𝗮𝘁𝗶𝗼𝗻 𝘄𝗶𝘁𝗵 𝗧𝗿𝗮𝗻𝘀𝗮𝗰𝘁𝗶𝗼𝗻 𝗢𝘃𝗲𝗿𝘀𝗶𝗴𝗵𝘁" 🚀 ERC3643 Association introduces a new UI plug-in tool for #DeFi protocols to enforce compliance with the ERC3643 standard, also known as the T-REX standard, an extension of ERC-20. 🛠️ ERC3643 tokens are permissioned and use #smartcontracts to define conditional transfer functions, allowing #decentralized validators to approve transactions based on predetermined rules, particularly for regulated #assets like securities. 🔒 The collaboration between ERC3643 Association, DevPro, and Tokeny led to the development of the UI tool, enabling ERC-20-compliant DeFi applications to interact with permissioned ERC-3643 tokens, covering various assets including #realworldassets, token securities, loyalty tokens, stablecoins, and CBDCs. 🤝 ERC3643 embeds compliance rules at a token level, ensuring interoperability with ERC-20-supporting applications while denying transactions if counterparties fail to meet compliance requirements. 🔄 Unlike other standards using wallet whitelisting for KYC checks, ERC3643 utilizes digital identity and verifiable credentials for user whitelisting, ensuring on-chain compliance validation while protecting privacy by publishing only proofs of verification on-chain. Companies such as APEX Group and Aztec Group are exploring this technology. 🔍 Source : https://lnkd.in/e7rtSFib Gregory Stone, Ken Chapman, Luc Falempin, Dennis O'Connell, Ivie S., Kostiantyn Dmitriiev, Joachim Lebrun, Sunny Jiang, Herbert Si, Hubert J.P. Jolly, Arijit Das, Collin Sellers

🗽Today, New York State Department of Financial Services released new guidance urging banks and other covered financial institutions to leverage blockchain analytics like TRM Labs to manage risk tied to digital assets. The guidance, which builds on DFS’s 2022 guidance on blockchain analytics, is classic DFS - concise and straight to the point - making it clear that blockchain analytics should now be part of the compliance toolkit for any bank with customers transacting in digital assets. So what does that look like in practice? DFS lays out a number of ways institutions should be thinking about deploying these tools: 🔍 Screening wallets of customers who have disclosed or engaged in crypto transactions to assess risk exposure ✅ Verifying sources of incoming funds that originate from VASPs 🌐 Monitoring the broader ecosystem to evaluate customer exposure to money laundering, sanctions, or other crimes 🤝 Identifying and assessing third-party risk, including counterparties of customers 📊 Comparing expected vs. actual behavior (like transaction thresholds) of crypto-active customers 📈 Using intelligence from holistic monitoring to refine risk assessments and risk appetite ⚖️ Evaluating risks for new products or services tied to virtual currency activity DFS is careful to emphasize that these are not one-size-fits-all mandates. Each institution is expected to tailor controls to its own risk profile, business model, and operational footprint — and update them regularly as new technologies, customer types, or counterparties emerge. DFS ends with this: "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." I agree. 

Blockchain analytics just went from innovation to expectation. #NYDFS now treats these tools as baseline controls for any bank or #FinTech exposed to virtual currency. On September 17, 2025, the New York Department of Financial Services issued an Industry Letter making clear: if you’re a banking organization in New York with exposure to virtual currency, even indirectly through your customers, regulators expect you to be using blockchain analytics as part of your compliance program. This is not a new regulation. But it is a signal that DFS is treating blockchain analytics as a baseline control for AML, sanctions, and broader risk management. Wallet screening, source-of-funds verification, VASP due diligence, and anomaly detection are no longer “nice to have.” They are compliance expectations. For FinTechs, banks, and VASPs alike, the message is clear… the tools and intelligence once seen as innovative are rapidly becoming regulatory minimums. Examiners will ask “What analytics are you using? How are you documenting decisions? How is this embedded in your risk framework?” And you will need to prove it with comprehensive documentation. The compliance frontier is shifting. Firms that wait to integrate blockchain analytics until compelled will be at a disadvantage, not just in exams, but in building the trust that regulators and counterparties now demand. Full DFS Letter here: https://lnkd.in/e6WFvntQ #FinTech #Blockchain #CryptoCompliance #VirtualCurrency #DigitalAssets #BlockchainAnalytics #Web3Compliance #FinTechLaw #RegTech #PolicyUpdate #LegalTech #RegulatoryChange #FinTechPolicy #ComplianceLaw #BankingInnovation #FinancialServices #FutureOfFinance #CryptoRegulation