Minnesota OKs Bank, Credit Union Crypto Custody Services

Governor Tim Walz signed House File 3709 into law, permitting Minnesota banks and credit unions to offer certain nonfiduciary virtual‑currency custody services beginning Aug. 1. Customer crypto must be legally and operationally segregated and may not be treated as the institution’s property.

The statute amends state law to allow banks and credit unions to provide virtual‑currency custody in a nonfiduciary capacity. Institutions may contract with third‑party service providers or subcustodians to facilitate custody, but the law requires custody assets to remain distinct from the institution’s own holdings and forbids recording those assets as the bank’s or credit union’s property.

Bernie Perryman, one of the bill’s original sponsors, described the intent as allowing Minnesota‑based financial institutions to evolve alongside their customers and members rather than forcing residents to rely on unregulated, out‑of‑state or offshore providers.

State records show 240 commercial insured banks operating in Minnesota, holding roughly $128 billion in assets, and 82 member‑owned credit unions. U.S. Bancorp is based in Minneapolis and is the nation’s seventh‑largest bank by total assets.

Lawmakers also advanced separate legislation to ban digital‑asset kiosks and ATMs after reports of consumer scams. That bill would restrict certain retail access points while allowing regulated institutions to offer custody services under state rules.

Some cryptocurrency firms are seeking federal charters for custody and banking services. Payward, the parent company of Kraken, has filed with the Office of the Comptroller of the Currency to form a national trust company focused on fiduciary custody for digital assets. The OCC has previously approved or conditionally approved national trust applications from other digital‑asset firms and is reviewing additional applications.

The Minnesota statute requires institutions to adopt legal and operational safeguards for segregated custody and permits subcontracted custodial arrangements. The law does not authorize banks or credit unions to act as fiduciaries for virtual‑currency custody. Financial institutions will need to update contracts, compliance programs and operational controls before offering the permitted services on Aug. 1.