Minnesota Banks and Credit Unions Get Green Light for Crypto Custody

Highlights:

• Minnesota has legalized crypto custody services for state banks and credit unions.
• Financial institutions must keep customer crypto assets fully separate from their own holdings.
• The new law takes effect on August 1, covering all custody services launched on or after that date.

Minnesota has approved a new law that allows state banking institutions and credit unions to offer virtual-currency custody services. The measure, HF 3709, was approved by Governor Tim Walz on May 15 and filed with the Secretary of State the same day as Chapter 93, according to the Minnesota Legislature.

The law gives approved financial institutions a clear path to hold, safeguard, control, or manage virtual currency and private keys for customers. Private keys are the digital codes that allow users to access and move their crypto assets. Under the law, banks and credit unions can provide these services in a fiduciary or nonfiduciary role, as long as they follow state and federal rules.

Minnesota cleared its banks and credit unions to hold crypto

Governor Tim Walz (@GovTimWalz) signed HF 3709 into law, letting Minnesota state-chartered banks and credit unions offer virtual-currency custody from August 1. Institutions can opt in but must give the state Commerce… pic.twitter.com/rQk28tPkqb

— BSCN (@BSCNews) May 18, 2026

Banks Get Clear Crypto Custody Authority

HF 3709 says a banking institution may provide virtual-currency custody services in a fiduciary or nonfiduciary role. A fiduciary role means the bank must act in the customer’s best interest while managing the assets.

The bill defines virtual-currency custody services as safekeeping, controlling, or managing virtual currency or the cryptographic private keys used to access virtual currency for another person. This language gives banks legal room to support crypto custody without turning those services into a free-for-all.

The law also places safety requirements on banks. Any banking institution that offers crypto custody must run the service in a safe and sound manner. It must keep written policies for risk management, internal controls, cybersecurity, business continuity, and compliance. These rules aim to reduce operational and security risks around digital assets.

Before starting these services, a banking institution must also give written notice to the commissioner at least 60 days in advance. The notice must explain the services and describe the bank’s risk management framework.

Credit Unions Can Serve Members

The law also creates a similar framework for Minnesota credit unions. A credit union may offer virtual-currency custody services to its members in a fiduciary or nonfiduciary capacity. Like banks, credit unions must follow all relevant state and federal laws. Credit unions must also maintain written policies for risk controls, cybersecurity, business continuity, and compliance. They must notify the commissioner at least 60 days before starting crypto custody services and explain how they plan to manage risk.

HF 3709 allows both banks and credit unions to use qualified third-party service providers or subcustodians. However, the financial institution must keep oversight responsibility. That means a bank or credit union cannot simply hand the service to another company and avoid responsibility for compliance.

New Rule Protects Customer Crypto Assets

One of the key parts of the law is asset segregation. Banks and credit unions must keep customer virtual currency and related control tools legally and operationally separate from their own assets. The law says those customer assets must not be treated as the institution’s property. This rule is important because crypto custody depends heavily on control and access. If a financial institution holds a customer’s private keys, it has a major responsibility to protect them. Clear separation can help reduce confusion if the institution faces financial or legal problems.

The commissioner may examine crypto custody services through the normal supervisory process. The law also says it does not allow banks or credit unions to take part in activities that are otherwise banned by law. It also does not change how virtual currency is classified under state or federal law.

The Minnesota House passed HF 3709 on April 30 by a 130-4 vote. The Senate later passed the amended bill on May 6 by a 51-16 vote. The House repassed it as amended on May 11 by a 119-6 vote before it went to the governor. The law becomes effective on August 1, and applies to virtual-currency custody services started on or after that date.