Minnesota's New Crypto Custody Law: What Banks and Credit Unions Need to Know

Minnesota recently joined a growing list of states that explicitly authorize banks and credit unions to hold cryptocurrencies for their customers. Governor Tim Walz signed HF 3709, which becomes effective on August 1, 2026. The law clarifies the legal framework for state-chartered institutions to offer custody services for digital assets, ending years of uncertainty. One credit union, St. Cloud Financial, has already launched its service. Below, we answer key questions about the legislation and its impact.

1. What exactly does Minnesota's new crypto custody law allow?

HF 3709 grants state-chartered banks and credit unions the authority to hold virtual currencies, including the cryptographic keys that control them, on behalf of their customers and members. This means these financial institutions can now offer regulated custody services for digital assets like Bitcoin. The law resolves a long-standing gray area that previously kept many institutions from entering the crypto space. Proponents say it ensures Minnesotans have a safe, regulated option for managing their digital wealth, rather than relying on unregulated out-of-state or offshore providers.

Minnesota's New Crypto Custody Law: What Banks and Credit Unions Need to Know — Source: bitcoinmagazine.com

2. When does the law take effect, and what are the key requirements?

The law takes effect on August 1, 2026. However, institutions that want to offer custody services must meet several conditions. They need to adopt written policies covering risk management, internal controls, and cybersecurity. Additionally, they must file a written notice with the Minnesota Commissioner of Commerce at least 60 days before launching. This notice should include a description of their risk management program. The law also mandates strict segregation of client digital assets from the institution's own holdings, a standard practice in traditional custody now extended to crypto.

3. Which other states have passed similar laws?

Minnesota joins New York, Wyoming, and Virginia in establishing a clear legal framework for banks and credit unions to offer crypto custody. These states have taken proactive steps to bring digital asset services under regulatory oversight. The Minnesota law is modeled partly on these precedents but includes specific provisions tailored to local institutions. The trend suggests more states may follow as demand for regulated crypto services grows among consumers and financial institutions alike.

4. Why was this law considered necessary?

Before HF 3709, banks and credit unions in Minnesota operated in a regulatory gray zone. While federal guidance existed, state-level clarity was missing. Chase Larson, an executive at St. Cloud Financial Credit Union, explained that the absence of clear guidance was itself a barrier to action. The new law changes the liability posture for institutions. It allows them to offer crypto custody with confidence that they are complying with state regulations. This keeps customers from turning to unregulated providers, as noted by Rep. Bernie Perryman, a lead author of the bill.

5. Which credit union already offers crypto custody, and how is it working?

St. Cloud Financial Credit Union launched its CU-Digital Asset Vault in March 2025, more than three months before the law's passage. It was the first credit union in Minnesota to offer institutional-grade crypto custody to members. As of May 2025, members are safeguarding approximately 13.5 Bitcoin through the platform. The Vault uses Coin2Core©, an infrastructure product built by DaLand CUSO, a credit union-owned technology cooperative. The platform was designed with compliance in mind, even before the law was enacted, positioning St. Cloud Financial ahead of the regulatory curve.

6. What technology powers St. Cloud Financial's crypto custody service?

The CU-Digital Asset Vault runs on Coin2Core©, developed by DaLand CUSO. DaLand CUSO is a credit union-owned technology cooperative whose mission is to keep community financial institutions connected to emerging digital payment and settlement networks. This infrastructure allows St. Cloud Financial to offer its members a secure, insured custody solution for Bitcoin. The architecture was built around anticipated regulatory requirements, ensuring the service meets compliance standards even before the law's effective date.

7. What does this mean for the future of crypto in Minnesota?

The law is expected to encourage more banks and credit unions to enter the crypto custody space. By providing a clear legal path, Minnesota positions itself as a forward-thinking jurisdiction for digital assets. The Minnesota Credit Union Network praised the law, stating it gives residents a safer way to manage crypto through regulated institutions. As other states consider similar legislation, Minnesota's approach may serve as a model, balancing innovation with consumer protection. For now, St. Cloud Financial Credit Union has a head start, but others are likely to follow.

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