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- Minnesota law lets banks and credit unions offer crypto custody services.
- Institutions must separate customer crypto assets from their own holdings.
- Firms must give 60 days’ notice before launching crypto custody services.
Minnesota has approved a law allowing state-chartered banks and credit unions to offer crypto custody services under state oversight. The measure creates rules for holding customer digital assets and managing private keys for assets such as Bitcoin.
Governor Tim Walz signed HF 3709 after the measure passed with bipartisan support. The law will take effect on August 1, 2026, under the Minnesota Department of Commerce.
The legislation allows financial institutions to provide virtual asset custody in a nonfiduciary role. It gives banks and credit unions authority to safeguard customer cryptocurrencies and related cryptographic keys.
Crypto Custody Services Require Asset Separation
Institutions offering crypto custody services must keep customers digital assets separate from their own holdings. They also cannot treat those assets as property of the bank or credit union.
The law requires written internal policies before any custody activity begins. Those policies must cover cybersecurity, risk management, business continuity planning, operational controls, and other compliance procedures.
Banks and credit unions must also notify the Minnesota Commissioner of Commerce before launching crypto custody services. The notice must be filed at least 60 days before operations begin.
The filing describes the institution’s cybersecurity controls and risk management framework. It provides state officials with time for regulated entities to start offering products that involve holding customer digital assets.
According to Minnesota government data for May 2025, there are 240 commercial banks that are insured in Minnesota. The assets of these banks amounted to approximately $128 billion.
Minnesota Crypto Rules Expand Beyond Credit Unions
There were 82 member-owned credit unions in the state that were affiliated with the Minnesota Credit Union Network. The new regime may apply to those financial institutions that are interested in and eligible to participate in digital asset custody.
It’s the latest of a series of digital asset regulations signed by Walz on May 5. That law has since prohibited cryptocurrency kiosks and ATMs in Minnesota following reports of scams targeting residents.
Outside of Minnesota, there is pressure on crypto ATMs as well. Fraud concerns have forced Canada to become more stringent, and Bitcoin Depot went bankrupt due to regulatory and financial pressure.
The Minnesota legislation follows crypto companies requesting broader banking access. Payward, Kraken’s parent company, recently applied to the Office of the Comptroller of the Currency for a national trust company charter focused on crypto custody services.
The regulation provides a clear roadmap for regulated crypto custodians in Minnesota. It also puts the protection of customer assets, security measures, and notice at the center of state oversight.
Also Read: Bitcoin Depot Bankruptcy Ends North America’s Largest Crypto ATM Network
