Crypto Regulation: Minnesota Gov. Signs Bill To Allow Digital Asset Custody

Minnesota-based banks and credit unions will soon be allowed to provide crypto custody services. This comes after Governor Tim Walz signed House File 3709 into law on Friday, which will play an important role in the field of crypto regulation.

Minnesota’s Crypto Regulation Witnesses Major Feat

For context, this legislation will allow financial institutions statewide to start providing virtual-currency custody services Aug. 1. The bill modernizes Minnesota banking law to allow banks and credit unions to retain digital assets in a customers account without being the custodian of the assets.

It also enables institutions to partner with other service providers and subcustodians for crypto custody operations without mixing customers’ assets with the institutions’ assets. It thus leads to clear rules around crypto custody regulation in the state. Whilst, the U.S. is preparing to welcome the CLARITY Act as it advances to a Senate full vote.

One of the original bill sponsors, state Representative Bernie Perryman, told earlier this year explained the idea behind this crypto regulation bill. He said that this proposal aims to make sure 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.”

Legally and operationally separation of customer funds from the financial institution’s balance sheet is a legal requirement under the law. Hence, financial institutions are required to comply to these clauses if they use third-party firms for custody support. It also means that funds cannot be considered to be institutional funds.

The measure could have a major impact on the state’s crypto regulation and financial sector. According to government data, the state’s 240 insured commercial banks hold $128 billion in assets as of May 2025.

A total of 82 credit unions are part of the Minnesota Credit Union Network. U.S. Bancorp is the Minneapolis-headquartered U.S.’s largest bank by assets. Hence, it’s safe to say that the legislation indeed concerns billions of assets.

Other Regulatory Updates In The Digital Asset Sector

The crypto custody bill follows Walz’s approval of another digital asset proposal. The governor signed House File 3642 on May 5. This crypto regulation bill prohibits digital asset kiosks and ATMs from being offered anywhere in the state.

The step came after reports surfaced that residents were deceived in scams. State representative Erin Koegel introduced the bill in February.

In the meantime, crypto companies are still pushing for federal approval to offer banking and custodial services. Earlier this month, Payward, the parent firm of Kraken, announced it applied for a national trust company charter with the Office of the Comptroller of the Currency.

If the application is approved, the company aims to create Payward National Trust Company to provide “fiduciary custody and other services primarily for digital assets.” In addition, firms are pushing the Senate to pass the CLARITY Act.