Minnesota has officially cleared the way for its banks and credit unions to offer cryptocurrency custody services, with Governor Tim Walz signing House File 3709 (HF3709) into law on Friday.
The new legislation amends the state’s existing banking statutes to permit financial institutions to provide virtual currency custody services in a nonfiduciary capacity, meaning they can hold digital assets on behalf of customers without taking on the legal responsibilities of a trustee. The law takes effect on August 1, 2026.
What the law allows
Under HF3709, Minnesota banks and credit unions are authorised to engage third-party service providers or subcustodians to help facilitate crypto custody operations. Crucially, the law requires that customer digital assets be legally and operationally segregated from the institution’s own assets and not treated as the institution’s property, a protection designed to ring-fence customer funds in the event of insolvency or financial difficulty.
The legislation passed through both chambers of the Minnesota legislature before landing on the Governor’s desk for signature.
Representative Bernie Perryman, one of the original sponsors of the bill in the Minnesota House, said the intent was straightforward: to ensure that “Minnesota-based financial institutions are allowed to evolve alongside their customers and members rather than forcing Minnesotans to rely on unregulated, out-of-state or offshore providers for services.”
Scale of impact
The scope of the law is significant. As of May 2025, Minnesota was home to 240 commercially insured banks holding approximately $128 billion in assets, alongside 82 member-owned credit unions affiliated with the Minnesota Credit Union Network. The state is also headquarters to U.S. Bancorp, the seventh-largest bank in the United States by total assets, based in Minneapolis.
With all of these institutions now eligible to offer crypto custody from August 1, the law represents one of the broader state-level mandates for digital asset services in recent memory.
A parallel crackdown on crypto ATMs
Not all crypto-related legislation in Minnesota moved in a permissive direction. Alongside the custody law, state lawmakers also advanced a separate bill to ban digital asset kiosks and ATMs across the state. The move came in direct response to a wave of scam incidents involving Minnesota residents being defrauded through crypto ATM transactions.
The dual approach, opening the door for regulated institutional custody while shutting down a high-risk consumer-facing channel, reflects the increasingly nuanced stance state governments are taking toward crypto regulation.
Federal momentum running in parallel
Minnesota’s move sits within a broader national push for clarity around crypto custody and banking services. At the federal level, several major crypto firms have been actively pursuing national trust company charters through the Office of the Comptroller of the Currency (OCC).
Kraken’s parent company Payward filed for an OCC national trust company charter earlier this month, aiming to establish Payward National Trust Company with a focus on digital asset custody. The OCC had previously approved or conditionally approved similar applications from Ripple Labs, BitGo, Circle, Fidelity Digital Assets, and Paxos in December 2025, and is currently evaluating a charter application from World Liberty Financial, the crypto firm co-founded by President Donald Trump and his sons.
Minnesota’s new law adds to the growing picture of the US financial system gradually opening its doors to digital asset services, at both the state and federal levels.
