Minnesota Governor Tim Walz signed HF 3709 into law on May 22, 2026, making the state the first in the Midwest to give state-chartered banks and credit unions explicit authority to offer cryptocurrency custody services. The law — now Chapter 93 of Minnesota's 2026 session laws — takes effect August 1.
The legislation authorizes banking institutions to provide "virtual-currency custody services" in a custodial capacity as agents, bailees, or trustees, covering the safekeeping and management of digital assets and the cryptographic private keys used to access them. Institutions must notify the state commissioner at least 60 days before launch, maintain written risk management and cybersecurity policies, and keep customer assets legally segregated from the institution's own balance sheet.
The deposit-flight problem drove the bill. Rep. Bernadette "Bernie" Perryman (R-St. Augusta), one of the authors, told CoinDesk that for years she has heard from local institutions losing customer funds to out-of-state exchanges and digital asset platforms. "When those dollars leave local institutions to crypto exchanges outside our state, there are fewer opportunities for those funds to be reinvested locally through small business lending, mortgages, and community development," Perryman said.
The competitive pressure behind that flight is no longer theoretical. Meggan Schwirtz, chief experience officer at St. Cloud Financial Credit Union, framed the issue starkly: "Large financial institutions and Wall Street firms are aggressively positioning themselves around digital asset infrastructure because they recognize the long-term implications for payments, settlement, custody, and the future movement of value." Schwirtz confirmed her credit union has already secured a Lloyd's of London-backed insurance arrangement specifically for custody operations — a sign that some Minnesota institutions are not waiting for August 1 to get their compliance infrastructure in order.
Ryan Smith of the Minnesota Credit Union Network added a federal layer: institutions offering custody will also have to satisfy AML program requirements, file Suspicious Activity Reports, and conduct enhanced KYC diligence regardless of what state law permits. The new statute explicitly states it does not override applicable federal law, and digital assets remain excluded from FDIC and NCUA insurance.
The law arrives as federal crypto legislation moves in parallel but unevenly. The GENIUS Act, signed into law in July 2025, established a federal stablecoin framework. The CLARITY Act, which would provide a broader digital asset market structure framework, is still advancing in the House. Minnesota's decision to move at the state level — rather than wait for federal uniformity — reflects a calculation that competitive positioning cannot wait for Washington.
State Rep. Steve Elkins (DFL-Minnetonka), a co-author of HF 3709, told CoinDesk the impetus was straightforward: "The community banks and credit unions wanted to be able to offer this service for their customers and members as part of a comprehensive array of financial services."
The August 1 effective date gives institutions roughly ten weeks to build out the policies, risk frameworks, and commissioner notice filings the statute requires. Institutions that miss the 60-day pre-notice window will be shut out until fall at the earliest. For community banks already tracking the custody opportunity, the clock started the moment Walz signed.
Minnesota also signed a separate bill on the same day banning crypto ATMs statewide, effective August 1 — a regulatory move that tightens access through unregulated kiosks while opening a supervised custody pathway through chartered institutions. The pairing is deliberate: the state is choosing which channels get to hold its residents' digital assets.
Sources: HF 3709, Chapter 93, Minnesota Session Laws 2026 (revisor.mn.gov); CoinDesk, May 22, 2026.