REGULATION | Minnesota State Signs Law Permitting Banks, Credit Unions to Offer Crypto Custody Services

Minnesota Governor, Tim Walz, has signed a bill allowing state-chartered banks and credit unions to offer cryptocurrency custody services adding the state to a growing list of U.S. jurisdictions opening the door for traditional financial institutions to handle digital assets.

The legislation, known as HF 3709, permits banks and credit unions in the state to provide virtual-currency custody services beginning Aug. 1, 2026, according to the Minnesota Legislature and reports from crypto news outlets.

Under the law, institutions must maintain written policies covering risk management, internal controls, and cybersecurity before launching custody operations. They are also required to notify the Minnesota Commissioner of Commerce at least 60 days before beginning such services. Client assets must remain segregated from the institution’s own holdings.

State Representative, Bernie Perryman, one of the bill’s sponsors, said the measure was designed to ensure Minnesota-based financial institutions can ‘evolve alongside their customers’ instead of forcing residents to rely on offshore or unregulated crypto firms.

The move comes as U.S. regulators and banks increasingly revisit digital asset services following easing federal restrictions on crypto-related banking activities. The Office of the Comptroller of the Currency (OCC) earlier clarified that nationally chartered banks could engage in crypto custody activities provided they maintain appropriate risk controls.

Traditional lenders have also been re-entering the sector. U.S. Bancorp, headquartered in Minneapolis, revived its institutional bitcoin custody service in 2025 after suspending it during a period of tighter regulatory scrutiny.

Some traditional lenders however have been opposed to OCC’s move to grant national bank charters to crypto and fintech firms.

The Bank Policy Institute (BPI), a lobbying group representing some of the largest U.S. banks, is considering legal action against the U.S. Office of the Comptroller of the Currency (OCC) arguing that the OCC has reinterpreted federal licensing rules in a way that could allow crypto companies to enter the U.S. banking system without the same level of oversight applied to traditional banks.

Minnesota’s crypto custody approval comes alongside tougher rules elsewhere in the state’s digital asset market. The state recently passed separate legislation banning crypto ATMs and kiosks, citing concerns over fraud and money laundering.

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