Minnesota has taken a major step in crypto regulation, becoming the first Midwest state to pass a unified law allowing locally chartered banks and credit unions to provide digital asset custody services. Governor Tim Walz signed the virtual currency custody law last week, and it will take effect on August 1.
Representative Steve Elkins, a co-author of bill HF 3709, celebrated the move as a milestone that addresses user concerns about lost keys and gives consumers safer options. “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,” Elkins told CoinDesk. He added that a person who loses an account ID or password wouldn’t risk losing their crypto if a bank acted as custodian.
Under the new law, state-chartered banks can provide virtual asset custody in a fiduciary or nonfiduciary capacity, while credit unions may operate only in a nonfiduciary custodial role. The legislation explicitly defines custody as the safekeeping, controlling, or managing of digital assets or their cryptographic private keys. It requires that customer digital asset holdings be separated from the financial institution’s own assets and mandates a 60-day advance written notice to the Minnesota Commissioner of Commerce, detailing risk management and cybersecurity frameworks before services can begin.
The St. Cloud Financial Credit Union and the Minnesota Credit Union Network both praised the law, calling it an important step toward giving consumers regulated, secure environments. They noted it strengthens protections against fraud, hacks, and loss while helping credit unions stay relevant.
In a parallel move, Governor Walz signed a separate bipartisan bill (SF 3868) that bans crypto ATMs statewide, effective August 1. Representative Erin Koegel said these kiosks had become “a tool for scammers to target some of our most vulnerable neighbors.” The ban’s immediate impact was underscored when Bitcoin Depot, one of the largest US bitcoin ATM providers, filed for bankruptcy on Monday.
