Surveillance: The key to a robust digital asset ecosystem

For financial institutions and banks in particular, surveillance is critical to develop a robust digital asset ecosystem, balancing innovation with integrity.

25 September 2025

7 mins

Corporate & investment bankingDigital solutionsFinancial institutions and investor groups

The convergence of traditional finance (TradFi) and digital assets is reshaping the financial landscape, offering opportunities for innovation alongside complex challenges. As digital assets – from cryptocurrencies like Bitcoin to stablecoins and tokenised securities – gain mainstream traction, financial institutions and in particular banks hold a unique responsibility and opportunity to integrate these fast emerging, high-risk technologies while upholding trust, transparency, and regulatory compliance.

We are driving this convergence through the adoption of comprehensive financial crime frameworks, with next generation surveillance at their core. This is a practical approach balancing innovation with integrity, and building resilient, compliant frameworks in the developing ecosystem.

Bridging TradFi and Digital Assets in Financial Crime: The 80/20 Rule

Digital assets are transforming financial services, driving new capabilities and revenue models. Standard Chartered has embraced this shift early, through ventures such as Zodia Custody and Zodia Markets for for institutional-grade custody and trading, and Libeara for tokenisation – plus recently launching bank-operated digital asset custody and trading solutions. Integration amplifies existing financial crime risks like money laundering and sanctions evasion, while introducing incremental risks unique to digital assets – such as cross-chain transactions and DeFi vulnerabilities – necessitating advanced surveillance to mitigate risks and build trust in the digital asset ecosystem.

Digital asset compliance is 80 per cent traditional finance, 20 per cent digital asset nuance – and it's that 20 per cent that's the difference between success or failure.

Sam Vicary

Head, Screening Product and Digital Asset Surveillance, Standard Chartered

As Sam Vicary notes core practices – Know Your Customer (KYC), Customer Due Diligence (CDD), risk assessments, and governance – remain foundational, allowing banks with robust TradFi compliance to leverage existing strengths.

The “20 per cent”, the features of blockchain-based assets includes pseudonymity, transparency, disintermediation, programmable finance, smart contracts, and 24/7 availability, which require tailored compliance approaches. Blockchain’s public ledger and advanced analytics enable financial institutions to address these risks, with only 0.14 per cent of crypto activity linked to illicit activities in 2024. By partnering with blockchain analytics firms specialising in digital asset compliance, banks can harness these capabilities.

How banks can scale surveillance for digital assets

Financial institutions have a pivotal role to play in fostering a secure and compliant digital assets ecosystem, and surveillance teams are emerging as key stakeholders and players acting as the frontline defence against financial crime. Multiple factors are critical to scaling a resilient surveillance programme for digital assets, including integrated coverage, advanced controls, on-chain analytics and specialised expertise.

1. Integrating comprehensive coverage across systems

Over the past year, we have adopted a measured approach to digital asset surveillance, beginning with Bitcoin and Ethereum and progressively expanding to stablecoins and money market fund tokens, guided by a digital asset onboarding framework to assess risks comprehensively.

By integrating digital asset and fiat surveillance systems, investigation teams gain a holistic view of client behaviour. For instance, wallet addresses are now screened in fiat transactions, such as SWIFT message fields, to identify links to on-chain activity, ensuring risks like illicit finance are detected across both worlds.

By removing duplicate processes in fiat-crypto integration, straight-through processing (STP) rates have been improved, enhancing client experience and ensuring efficient, comprehensive risk coverage. This integrated approach offers a model for financial institutions to scale surveillance, balancing client experience with robust risk management across traditional and digital finance.

2. Strengthening controls and quality assurance

Our surveillance teams have also introduced digital asset-specific Key Control Indicators (KCIs) to flag system weaknesses and operational anomalies early, driving continuous improvement. A dedicated Quality Assurance (QA) team rigorously reviews alerts on an ongoing basis, ensuring escalations are evidence-based and false positives are adequately justified. This paves the way for system optimisations and enhanced operational efficiency. Establishing clear KCIs and QA processes is a practical step for financial institutions to enhance surveillance accuracy, especially when scaling digital asset operations.

3. Leveraging on-chain analytics for compliance

Much of the 20 per cent features of blockchain-based assets, such as transparency and disintermediation, are addressed through on-chain analytics, enabling the tracing of fund flows and patterns. For instance, we leverage blockchain analytics tools to tag wallet addresses linked to sanctions or fraud, placing tokens on hold if their origination is associated with illicit activity, regardless of the number of transaction hops. Continuous monitoring sets this approach apart by generating alerts for investigation if beneficiaries are later associated with illicit clusters, even years after the transaction.

This capability is supported by the extensive amount of blockchain information available, and provides an advantage over fiat currency, where transaction tracing is limited by time and proximity constraints. Success hinges on deploying the advanced on-chain analytics tools, configuring them effectively, and equipping skilled, trained teams to maximise their impact. Financial institutions can replicate this by partnering with blockchain analytics firms to integrate on-chain data into KYC and CDD processes, ensuring proactive, compliant surveillance of ultimate originators and beneficiaries.

Proactively monitoring digital asset movements with both pre-transaction and post-transaction controls enables early detection and comprehensive management of risk events, ensuring a safer and more secure environment in this dynamic and rapidly evolving space.

Cayden Chang

Product Owner, Digital Asset Surveillance, Standard Chartered

4. Building expertise and a learning culture

Effective surveillance hinges on skilled teams. Learning and development programs provide comprehensive training on digital asset foundations, surveillance techniques, investigation methodologies, product capabilities, and hands-on analytics. Regular forums foster a learning culture, enabling surveillance teams to share insights and stay ahead of evolving threats.

We also engage widely with industry peers, central banks, regulators, public and private partnerships, at the same time collaborating with compliance leaders from crypto-native firms for shared learnings. For financial institutions, blending TradFi expertise with crypto-native knowledge through training, hiring blockchain specialists, and industry collaboration is critical to building resilient surveillance capabilities for digital asset operations.

5. Accelerating adoption to build risk muscle

Embracing digital assets requires foresight and openness to navigate an evolving landscape, but early adoption can build risk management capabilities that enable rapid adaptation. By proactively engaging with digital assets early, financial institutions can develop a strong “risk muscle”, integrating surveillance frameworks that address financial crime and regulatory complexities from the outset.

Our early ventures in institutional-grade digital asset custody and trading solutions demonstrate how bold innovation, paired with partnerships, accelerates both learning and the development of scalable compliance frameworks. This early-mover advantage has also strengthened client trust and positioned the Bank to meet growing demand for digital asset services. Financial institutions can emulate this by experimenting early, leveraging strategic partnerships, and investing in digital asset surveillance to build resilient frameworks as they innovate.