Minnesota Regulates Virtual Currency Custody Services with New Law

Minnesota has become one of the latest states in the US to regulate virtual currency custody services, with a new law allowing state-chartered banks and credit unions to offer such services from August 1, 2026. The law, signed by Governor Tim Walz, requires institutions to follow strict guidelines to ensure the safekeeping and management of digital assets on behalf of their customers.

The new law applies to crypto custody services that start on or after August 1, 2026, and banks may offer the service in a fiduciary or non-fiduciary role, while credit unions may provide custody services to members under state and federal limits. Institutions must keep written policies for risk management, internal controls, cybersecurity, business continuity, and compliance.

They are also required to send written notice to the Minnesota Commissioner of Commerce at least 60 days before launching the service, describing the services and their risk management framework. Customer crypto assets and related control systems must stay separate from the institution's own assets, and institutions may use qualified third-party service providers or subcustodians.

The law aims to allow Minnesota financial institutions to 'evolve alongside their customers and members' rather than pushing residents towards out-of-state or offshore providers. The move comes as US banks face clearer rules around digital asset services, with the OCC allowing regulated banks to buy, sell, and provide custody for crypto held for customers.