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Bill Summary · HF 3709

Summary of HF 3709 (2025-2026) — Minnesota: Virtual-Currency Custody Services

Purpose and intent

HF 3709 authorizes banking institutions and credit unions to offer virtual-currency custody services. The bill provides a regulatory framework to safekeep, control, or manage virtual currencies or the cryptographic private keys used to access them, on behalf of customers. It aims to enable supervised, safe, and segregated custody activities consistent with existing fiduciary/custodial duties and applicable state and federal law.

Key provisions and changes

Section 1 — Minnesota Statutes Chapter 48 (Banks)

  • Defines “virtual-currency custody services” as safekeeping, controlling, or managing virtual currency or related private keys on behalf of another person.
  • A banking institution may provide these services in fiduciary or nonfiduciary capacity, subject to this section and other law.
  • Safety and soundness requirements:
    • Institutions must have written risk-management, internal controls, cybersecurity, business continuity, and compliance policies.
  • Notice requirement:
    • Institutions must notify the state commissioner at least 60 days before starting custody services, describing the services and risk framework.
  • Fiduciary capacity:
    • Banks may act as agent, bailee, or trustee for safekeeping or administration of virtual currency, to the same extent as other assets.
    • Commissioner may limit or condition authority if activity is unsafe or unsound.
  • Asset segregation:
    • Customer virtual currency and control mechanisms must be legally/operationally segregated from the bank’s assets; must not be treated as bank property.
  • Third-party service providers:
    • Banks may engage qualified third-party providers or sub-custodians while maintaining oversight and compliance.
  • Supervision and examination:
    • Custody services are subject to examination in the regular supervisory process.
  • Construction:
    • The section does not authorize prohibited activities or alter the legal characterization of virtual currency.
  • Effective date:
    • August 1, 2026; applies to custody services commenced on or after that date.

Section 2 — Minnesota Statutes Chapter 52 (Credit Unions)

  • Similar structure and provisions as banks:
    • Definition of custody services; authority for fiduciary or nonfiduciary provision.
    • Safety and soundness: required policies on risk management, internal controls, cybersecurity, business continuity, and compliance.
    • Notice to commissioner: at least 60 days prior to starting custody services.
    • Fiduciary capacity: may act as agent/bailee/trustee for safekeeping or administration.
    • Asset segregation: customer assets must be segregated and not treated as credit-union property.
    • Third-party service providers: allowed with oversight and compliance requirements.
    • Supervision and examination: subject to commissioner’s exams.
    • Construction: consistent with other laws; does not alter currency characterization.
  • Effective date:
    • August 1, 2026; applies to custody services commenced on or after that date.

Who is affected

  • Banking institutions (banks) and savings banks operating in Minnesota that choose to offer virtual-currency custody services.
  • Minnesota credit unions that elect to provide such services to their members.
  • The Minnesota Department of Commerce (or relevant state banking/financial regulator) responsible for notices, oversight, and examinations.

Procedural and timeline notes

  • The bill becomes effective August 1, 2026.
  • Institutions must provide at least 60 days’ written notice to the commissioner before commencing custody services.
  • Ongoing supervision and examinations will be part of normal regulatory processes.

Impact considerations

  • Establishes a formal regulatory pathway for custody of virtual currencies, potentially increasing institutional participation in digital-asset services.
  • Emphasizes risk management, segregation of assets, and oversight to protect customers and maintain financial system safety.
  • Allows use of third-party custodians while preserving supervisory authority over custodial activities.

Compiled from official sources — confirm details with the bill’s official record.

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