Minnesota, USA, is integrating digital asset custody into its local financial system. Governor Tim Walz has signed House File 3709, allowing state banks and credit unions to offer cryptocurrency custody services starting August 1.
Custody services available starting August 1.
This bill updates Minnesota’s banking laws to allow state-regulated financial institutions to hold digital assets on behalf of their customers. The bill also clarifies that customer assets may be recorded on customer accounts but must not be considered the institution’s own assets.
The new regulations also permit banks and credit unions to collaborate with third-party service providers and sub-custodians to conduct related business, provided that customer assets are segregated from the institution’s own assets and not commingled.
Customer assets must be segregated from institutional assets.
The law codifies asset segregation into legal and operational requirements. If financial institutions use third parties for custody services, they must still comply with regulations requiring client funds to be managed separately. This means such assets cannot be included as the institution’s own funds on its balance sheet.
One of the bill’s sponsors, State Representative Bernie Perryman, previously stated that this arrangement is intended to enable Minnesota’s local financial institutions to keep pace with evolving customer needs and prevent residents from relying solely on out-of-state or offshore service providers with weaker regulation.
Involves in-state banks and credit unions
According to government data cited in the article, as of May 2025, the 240 state-chartered deposit-taking commercial banks in Minnesota held approximately $128 billion in assets. Additionally, there are 82 credit unions in Minnesota that are part of the Minnesota Credit Union Network.
This means that the new legislation does not cover a limited pilot program, but rather could significantly impact the digital asset business strategies of a substantial portion of financial institutions within the state.
In-state regulatory oversight of ATM operations is being tightened simultaneously.
Before signing the custody bill, Walz also signed another digital assets bill, House File 3642, on May 5. According to the text, this bill prohibits the provision of digital asset kiosks and ATMs within the state, following incidents of fraud targeting residents.
Meanwhile, crypto companies continue to push for federal banking and custody licenses. Payward, Kraken’s parent company, stated earlier this month that it has applied to the Office of the Comptroller of the Currency for a national trust charter, aiming to offer custodial services primarily focused on digital assets upon approval.