Minnesota Law Opens Crypto Custody to Banks, Credit Unions — One Credit Union Already Has a Head Start

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Minnesota has become the latest state to grant banks and credit unions the legal authority to offer cryptocurrency custody services, a move that proponents say ends years of regulatory ambiguity that kept institutions on the sidelines of a market now worth trillions. Governor Tim Walz signed HF 3709 into law. The legislation takes effect August 1, 2026. The law permits state-chartered banks and credit unions to hold virtual currency and the cryptographic keys that control it on behalf of customers and members. Minnesota joins New York, Wyoming, and Virginia, which have established similar frameworks. According to the law, institutions seeking to offer custody services must adopt written policies covering risk management, internal controls, and cybersecurity before launching. They must also file written notice — including a description of their risk management program — with the Minnesota Commissioner of Commerce at least 60 days in advance. The law mandates strict segregation of client digital assets from an institution’s own holdings, a standard requirement in traditional custody law extended to crypto. Rep. Bernie Perryman, a lead author of the bill, said the legislation ensures Minnesota financial institutions can “evolve alongside their customers and members,” rather than forcing residents to turn to unregulated out-of-state or offshore providers. The Minnesota Credit Union Network said the law “gives Minnesotans a safer way to manage crypto” by routing digital asset activity through regulated institutions subject to established oversight. One institution was already operating St. Cloud Financial Credit Union launched its CU-Digital Asset Vault™ in March— more than three months before the law’s passage — making it the first credit union in Minnesota to offer members institutional-grade crypto custody. As of this month, St. Cloud Financial members are safeguarding approximately 13.5 Bitcoin through the platform, the union told Bitcoin Magazine. The Vault runs on Coin2Core©, an infrastructure product built by DaLand CUSO, a credit union-owned technology cooperative whose stated mission is to keep community financial institutions connected to emerging digital payment and settlement networks. Chase Larson, an executive at St. Cloud Financial, told Bitcoin Magazine that the new law resolves a structural problem that had blocked many institutions from moving forward, even when leadership wanted to. “For too long, credit unions and community banks in Minnesota have been operating in a regulatory gray zone where the absence of clear guidance was itself a barrier to action,” Larson said. “What it practically changes is the liability posture.” The Vault’s architecture was designed around compliance before regulatory clarity existed, according to Larson. The system uses a collaborative safekeeping model in which no single party — not the credit union, not the member, and not DaLand — holds independent control over a member’s assets. Larson said member feedback has centered on three consistent themes: trust in the institution, ease of use, and comfort in having a local, relationship-based organization involved in the custody experience. “Members engaging with the CU-Digital Asset Vault™ are having broader discussions around financial strategy, long-term asset ownership, security, and the future of digital finance,” he said. “That is exactly the type of deeper relationship a core-centric philosophy is designed to foster.” Broader crypto implications The law’s passage is drawing attention from institutions across Minnesota and potentially beyond. Larson said conversations that once started with “is this even allowed?” are now beginning with “how do we do this responsibly and strategically?” He framed the law as part of a national pattern, noting a growing wave of state-level crypto legislation working through legislatures across the country. “Financial infrastructure, money movement, and the storage of value are evolving, and digital asset networks will increasingly exist alongside traditional financial systems,” Larson said. St. Cloud Financial’s longer-term roadmap — internally called the R-Path© — envisions expanding from custody into blockchain-enabled payments, real-time settlement, stablecoin frameworks, and other digital financial services as the regulatory environment matures. Larson said the legislation does not alter that plan. “The legislation does not fundamentally change our direction,” he said. “It validates the strategic path we were already on.” The law takes effect August 1. Institutions that want to offer custody services by that date must submit their 60-day notice to the Commerce Commissioner no later than June 2.

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