Minnesota has officially authorized banks and credit unions to offer crypto custody services starting in August, expanding the ability of financial institutions to integrate digital assets into their operations. Governor Tim Walz signed House File 3709 into law, permitting these custody services while establishing guardrails to protect customer assets.
The legislation allows financial institutions to engage third-party providers or subcustodians to manage virtual currency custody, with strict requirements ensuring that clients’ funds must be legally and operationally segregated from the institution’s own assets, preventing them from being considered the bank's or credit union’s property. This nonfiduciary framework aims to balance innovation with consumer protection.
By updating Minnesota’s statutes, the law aims to keep local financial institutions competitive and relevant, reducing dependence on unregulated or offshore crypto service providers. One early sponsor of the bill highlighted its goal to allow Minnesota-based banks to evolve alongside their customers’ growing interest in digital assets.
The new regulation could impact a wide range of institutions across the state. Minnesota’s banking sector includes over 200 commercial insured banks holding substantial assets, alongside dozens of member-owned credit unions. The state is also home to U.S. Bancorp, one of the country’s largest banks by total assets, headquartered in Minneapolis.
In the same legislative session, Minnesota lawmakers passed a separate bill banning digital asset kiosks and ATMs statewide due to concerns over consumer scams involving these machines.
Nationally, several crypto firms are pursuing federal approval to broaden their service offerings. For example, Kraken’s parent company applied for a national trust charter with the US Office of the Comptroller of the Currency to provide fiduciary custody services for digital assets. This movement reflects a broader effort by crypto companies to obtain clear regulatory frameworks at both the state and federal levels.