Minnesota Approves Crypto Custody Law for Banks and Credit Unions

Minnesota is preparing to become one of the first U.S. states to officially allow locally chartered financial institutions to provide crypto custody services after Governor Tim Walz signed a new virtual currency law. The legislation, which takes effect on August 1, establishes a clear legal framework for state-chartered banks and credit unions to manage digital assets and cryptocurrency private keys for customers.

The new Minnesota crypto custody law positions the state as the first in the Midwest to introduce comprehensive legislation covering both banks and credit unions. While states such as Wyoming, New York, and Virginia have already adopted crypto-related custody regulations, Minnesota’s approach expands access within traditional financial institutions operating under state oversight.

State Representative Steve Elkins, one of the bill’s authors, said the legislation was designed to help community banks and credit unions offer secure cryptocurrency services as part of broader financial products. He noted that many crypto holders permanently lose access to their digital assets because they misplace passwords or account credentials. Under bank-backed custody solutions, institutions would securely manage sensitive account information and reduce the risk of permanent loss.

The law authorizes Minnesota state-chartered banks to provide crypto custody in fiduciary and nonfiduciary roles, while credit unions may offer nonfiduciary custody services. Customer digital assets must remain fully separated from institutional assets and cannot be treated as bank property.

Financial institutions interested in offering cryptocurrency custody services must provide the Minnesota Commissioner of Commerce with a 60-day advance notice outlining cybersecurity protocols, compliance measures, and risk management systems.

At the same time, Minnesota is tightening oversight of the crypto industry by banning crypto ATMs and kiosks statewide beginning August 1. Lawmakers cited growing scam activity targeting elderly residents and vulnerable consumers. The move comes as major bitcoin ATM operator Bitcoin Depot reportedly filed for bankruptcy earlier this week.