Minnesota has passed new legislation allowing state-chartered banks and credit unions to provide virtual-currency custody services, marking another step in the growing integration of digital assets into traditional finance.
Under Chapter 93 of H.F. 3709, signed by Governor Tim Walz on May 15, 2026, financial institutions in the state will be permitted to safeguard, manage, and control cryptocurrencies and related private keys on behalf of customers. The law became effective on August 1, 2026.
The legislation defines virtual-currency custody services as the safekeeping, management, or control of digital assets and cryptographic keys for another person. Crucially, the law authorizes custody in a nonfiduciary capacity: state-chartered banks may provide custody services in either a fiduciary or nonfiduciary capacity, while credit unions may operate only in a custodial, nonfiduciary capacity. A nonfiduciary custodian provides safekeeping without assuming the heightened legal duties of care that a fiduciary owes its customers.
The custody authorization passed with unusually broad bipartisan support. The House passed HF 3709 on April 30, 2026, by a 130-4 vote; the Senate passed an amended version on May 6 by 51-16; and the House concurred with the Senate amendments on May 11 by 119-6 before the bill went to the governor. Rep. Bernie Perryman (R-St. Augusta) sponsored the House version, and Rep. Steve Elkins was among the bill’s three authors.
Banks and credit unions must follow strict risk controls
While the law opens the door for crypto custody services, Minnesota regulators also introduced several compliance and risk-management requirements.
Banks and credit unions offering custody services must maintain written policies covering cybersecurity and internal controls, business continuity planning, risk management frameworks, and regulatory compliance procedures.
Institutions are also required to notify Minnesota’s commissioner at least 60 days before launching custody services.
The law further mandates that customer crypto assets remain legally and operationally segregated from institutional assets to prevent misuse or commingling of funds under section 336.12-102 to 336.12-107.
Third-party crypto custodians allowed
The legislation also permits financial institutions to work with qualified third-party custodians or subcustodians, provided the institutions retain oversight responsibility and ensure compliance with state rules.
Minnesota lawmakers noted that the law does not change the legal status of digital assets under federal or state law, nor does it permit activities otherwise prohibited under existing banking regulations.
The approval comes as Minnesota becomes increasingly active in digital asset policy discussions.
Earlier this month, reports suggested the U.S. Commodity Futures Trading Commission (CFTC) was monitoring Minnesota legislation tied to prediction markets and crypto-related financial activity as legal disputes over federal and state oversight continue to grow.
Broader US crypto regulatory shift continues
Minnesota’s move reflects a broader push across the United States to establish clearer legal frameworks for digital assets and blockchain-based financial services.
Several states have recently explored crypto banking, custody, and stablecoin legislation as regulators attempt to balance innovation with consumer protection and financial stability concerns.
Minnesota has also been active on other crypto-policy fronts. Earlier this month, reports indicated the U.S. Commodity Futures Trading Commission (CFTC) was monitoring Minnesota legislation tied to prediction markets as legal disputes over federal and state oversight continue to grow — though that prediction-market matter is a separate thread from the bank custody framework established by HF 3709.
The new custody framework could position Minnesota-based banks and credit unions to participate more directly in the growing institutional digital asset market while operating under formal regulatory supervision.
Also read: SEC Prepares Framework for Tokenized Stock Trading in Major Crypto Policy Shift
