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minnesota signs law allowing banks credit unions offer crypto custody services thumbnail

Minnesota Signs Crypto Custody Law for Banks and Credit Unions

Minnesota Governor Tim Walz signed H.F. 3709 into law on May 14, 2026, making Minnesota one of the latest states to explicitly authorize banks and credit unions to offer virtual-currency custody services to their customers.

The new law, enrolled as Chapter 93 of the 2026 session laws, permits state-chartered banking institutions and credit unions to hold digital assets on behalf of clients in a nonfiduciary capacity. The act was presented to the governor on May 12 and signed two days later at 10:00 a.m.

Crypto custody, in practical terms, means a regulated institution stores the private keys that control a customer’s digital assets. Until now, Minnesota’s banking statutes had no explicit framework for this service, leaving institutions in a legal gray area.

What H.F. 3709 authorizes and requires

The law adds two new statutory sections: 48.741 for banks and 52.25 for credit unions. Both grant authority to provide virtual-currency custody services subject to state and federal law, while requiring institutions to operate on a safe-and-sound basis.

Banks and credit unions must each file written notice with the state commissioner at least 60 days before launching custody offerings. They must also maintain written risk management and cybersecurity policies, segregate customer assets from institutional holdings, and submit to supervisory examination.

Credit unions are additionally permitted to use qualified third-party service providers or subcustodians, a provision that could lower the barrier for smaller institutions that lack in-house infrastructure. The custody provisions take effect on August 1, 2026.

Importantly, the law does not change the legal characterization of virtual currency under state or federal law, nor does it authorize activities otherwise prohibited by existing regulation.

Why regulated custody through traditional institutions matters

Rep. Bernie Perryman, a sponsor of the bill, said the legislation was designed to let Minnesota institutions evolve with customer demand rather than pushing residents toward unregulated or offshore providers. That framing positions the law as consumer protection as much as industry expansion.

The Minnesota Credit Union Network, which represents 82 not-for-profit, member-owned credit unions in the state, backed H.F. 3709 in a formal letter to legislators. The organization argued that regulatory oversight of custody services would better protect members than the status quo, where consumers often turn to less-regulated alternatives.

For context, custody is a foundational layer of financial services infrastructure. Institutions that previously relied on third-party custodians like Prime Trust have learned how counterparty risk in crypto custody can cascade into legal disputes. Minnesota’s framework attempts to keep that risk within the regulated banking system.

The move also comes as lawsuits tied to failed crypto custodians continue to work through courts, reinforcing the argument that state-level regulatory clarity is overdue.

What to watch after August 1

Legal authorization does not guarantee immediate rollout. The 60-day commissioner notice requirement means the earliest any institution could realistically launch custody services is October 2026, even if it files on August 1.

Operational readiness will vary. Larger banks may already have the compliance and cybersecurity infrastructure to move quickly, while smaller credit unions will likely evaluate third-party subcustodian partnerships before committing resources.

Minnesota’s law could also influence neighboring states. As institutional interest in digital assets grows, state legislatures face increasing pressure to provide clear frameworks rather than rely on patchwork federal guidance.

The broader crypto market backdrop adds context to the timing. Bitcoin traded near $76,783 at press time, and the Fear & Greed Index sat at 25, reflecting extreme fear among market participants. Whether that sentiment accelerates or slows institutional adoption of custody services in Minnesota remains an open question, but the legal foundation is now in place.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.