Key Takeaways
Minnesota will authorize its 322 state-chartered banks and credit unions to offer custody services for bitcoin and other digital assets beginning August 1, under a new law signed by Governor Tim Walz.
The bill ensures 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," state Representative Bernie Perryman, an original sponsor, said in March.
The legislation, HF 3709, amends state statutes to permit virtual-currency custody in a non-fiduciary capacity. It mandates that customer funds be "legally and operationally segregated" from the bank’s or credit union's assets and not be treated as its property. The law also allows institutions to engage third-party service providers to facilitate the services.
This development provides a state-regulated crypto custody framework for Minnesota's 240 commercial banks, which hold approximately $128 billion in assets, and 82 credit unions. The move could notably affect Minneapolis-based U.S. Bancorp, the country's seventh-largest bank by total assets. By creating a clear legal pathway, the state aims to keep crypto custody business within its regulated financial system, contrasting with the federal approach where firms like Kraken have sought national trust charters from the Office of the Comptroller of the Currency (OCC).
The new custody rule stands in contrast to another legislative effort in the state aimed at banning digital asset kiosks and ATMs in response to rising incidents of fraud. This dual approach highlights a nuanced regulatory stance: embracing institutional crypto services while cracking down on retail-focused avenues perceived as higher risk. The law's implementation on August 1 will be closely watched as a potential model for other U.S. states navigating digital asset regulation.
This article is for informational purposes only and does not constitute investment advice.
