Minnesota will start allowing banks and credit unions to offer and perform certain virtual currency custody services on Aug. 1.
Governor Tim Walz signed the bill creating the law (HF 3709) on May 8, according to a press release.
The law allows banking institutions to provide virtual currency custody services in a nonfiduciary capacity provided they do so in a safe and sound manner; maintain written policies and procedures governing risk management and other practices; and notify the commissioner at least 60 days in advance, according to the bill’s text.
Each institution must keep the virtual currency segregated from its assets; may engage third-party service providers or subcustodians to facilitate custody if the institution retains oversight responsibility and maintains compliance; and is subject to examination by the commissioner, per the text.
One of the authors of the legislation, Rep. Bernie Perryman, said in an article on her website that the virtual currency bill allows, but does not require, banks and credit unions to hold virtual currency on behalf of customers or members.
“This bill is necessary because, as cryptocurrency ownership has grown, federal regulators have clarified that banks can provide cryptocurrency custody services, but state law must authorize state-chartered institutions to participate,” Perryman said in the article. “Passing this law helps keep Minnesota’s financial services industry competitive with other states that are offering these services.”
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Perryman added that the bill is focused only on custody, and it does not include investment or trading.
The Minnesota Credit Union Network celebrated passage of the legislation in a May 21 press release, saying that this was a key legislative priority for the organization and that it will expand consumer choice, strengthen financial security and position credit unions to meet members’ evolving needs.
“Minnesotans increasingly use digital assets but rely on out-of-state or unregulated companies to store them,” the organization said. “This increases consumer risk and limits Minnesota financial institutions’ ability to meet demand and keep those funds in local communities. The new authority allows credit unions to provide secure storage and related services within a regulated, local framework, enhancing consumer protection against fraud, hacking and loss.”
