Minnesota Leads the Way with New Law for Local Banks to Offer Crypto Custody Services
Why Minnesota is empowering local banks to fight Wall Street for crypto revenue
Coindesk
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Minnesota has enacted a pioneering law allowing state-chartered banks and credit unions to provide cryptocurrency custody services, aimed at countering the outflow of deposits to larger Wall Street firms. This legislation, effective from August 1, 2026, addresses the competitive pressures local financial institutions face in the evolving digital asset landscape.
- 01The new law enables local banks and credit unions to offer cryptocurrency custody services, addressing concerns over deposit flight to out-of-state platforms.
- 02Lawmakers like Rep. Bernadette Perryman emphasize the need for local institutions to remain competitive in the face of Wall Street's aggressive entry into the crypto market.
- 03The law requires compliance with strict federal regulations, including anti-money laundering programs, despite the absence of federal deposit insurance for digital assets.
- 04Minnesota's legislation received bipartisan support and is seen as a significant milestone for local financial institutions in adapting to the digital economy.
- 05A statewide ban on crypto ATMs and kiosks will also take effect, reflecting a cautious regulatory approach to cryptocurrency in the state.
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Minnesota has taken a significant step in the financial landscape by passing a groundbreaking law that allows state-chartered banks and credit unions to offer cryptocurrency custody services. This move is a response to the growing concern about deposit flight to larger Wall Street firms as they expand their presence in the crypto industry. The legislation, signed by Governor Tim Walz, is set to take effect on August 1, 2026, and aims to keep community banks competitive in an increasingly digital economy. Local lawmakers, including Rep. Bernadette Perryman, have highlighted the importance of this law in reinvesting funds locally, which are often lost to out-of-state crypto exchanges. The law mandates compliance with stringent federal regulations, including anti-money laundering (AML) protocols, although digital assets will not be covered by federal deposit insurance. In conjunction with this law, Minnesota will also implement a ban on crypto ATMs and kiosks statewide, marking a cautious regulatory stance towards cryptocurrency. This legislative framework positions Minnesota as a leader in the Midwest for local financial institutions adapting to the challenges and opportunities presented by digital assets.
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This law will enable local banks and credit unions to retain deposits that might otherwise flow to larger, out-of-state crypto platforms, thereby supporting local economic growth.
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