FinanceShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMinnesota's Local Banks Mobilize Against Wall Street for Crypto Revenues
Local financial institutions in Minnesota are taking action against Wall Street's encroachment into the cryptocurrency sector.
By Olivier Acuna|Edited by Aoyon Ashraf May 22, 2026, 5:53 p.m. 3 min readMake preferred on
Rep. Bernadette "Bernie" Perryman, a lawmaker from Minnesota, noted her co-authorship of a bill aimed at preventing capital flight from the state. (Bernadette "Bernie" Perryman)Key Points:
- Minnesota has introduced a pioneering law that permits state-chartered banks and credit unions to provide cryptocurrency custody services to reduce the outflow of deposits to external crypto platforms.
- Legislators and local bankers emphasize that this initiative is essential for maintaining the competitiveness of community banks as Wall Street intensifies its focus on digital assets.
- This legislation, effective August 1, 2026, coincides with a statewide prohibition on crypto ATMs and kiosks, and mandates that institutions offering custody services comply with rigorous federal standards without federal deposit insurance protection.
As Wall Street aggressively expands into digital asset services, Minnesota’s local financial institutions are compelled to act to prevent deposit outflows and stabilize the local economy, according to insights shared with CoinDesk by a local banker and a legislator.
“In recent years, I have frequently encountered worries regarding the rising trend of deposit migration from local banks to cryptocurrency exchanges and digital asset platforms,” remarked Rep. Bernadette “Bernie” Perryman (R-St. Augusta).
She, along with others, co-authored the legislation signed by Governor Tim Walz, which allows state banks and credit unions to offer crypto custody services. Perryman pointed out that this deposit flight poses substantial challenges for Minnesota’s economy.
“When funds leave local institutions for crypto exchanges outside our borders, it reduces the chances for those funds to be reinvested in local small businesses, mortgages, and community development initiatives,” she explained.
From the perspective of local bankers, staying competitive is crucial. Meggan Schwirtz, chief experience officer at St. Cloud Financial Credit Union, conveyed to CoinDesk that, “This is now more than just a matter of consumer interest; it’s about the commercial viability and competitive standing of financial institutions.”
'Aggressively Positioning'
Schwirtz emphasized that major financial entities and Wall Street are rapidly establishing themselves in the digital asset space, recognizing the long-term impacts on payments, settlements, custody, and the future of value transfer.
She added that local banks and credit unions must adapt to this evolving landscape if they wish to stay relevant to future generations of consumers.
This urgency is underscored by Wall Street's increasing engagement with stablecoins and tokenization to maintain a competitive edge in adopting blockchain technologies.
A recent report from Jefferies indicated that while stablecoins might not cause an immediate rush on U.S. bank deposits, their gradual acceptance could significantly impact bank profitability. The analysis projected that the adoption of privately-issued digital dollars could lead to a 3% to 5% decline in core deposits over five years, potentially reducing average bank earnings by around 3%.
In fact, discussions about tokenization and stablecoins dominated this year’s Consensus Miami event, eclipsing all other topics in the crypto space. “We are transitioning into an era where the entire economy is set to be tokenized,” stated Joseph Lubin, CEO and founder. Concurrently, Circle's SVP of marketing, Tim Queenan, mentioned that institutions are increasingly investigating how to transition core financial infrastructures on-chain, noting that stablecoins have become so integral to payments that many users no longer identify as crypto users.
Significant Development
Minnesota has recently established itself as the first state in the Midwest to implement a cohesive legislative framework that permits both state-chartered commercial banks and credit unions to provide cryptocurrency custody services.
The new law was enacted by Governor Tim Walz last week and is set to take effect on August 1, following overwhelming bipartisan support from the legislature earlier this month.
Ryan Smith, chief Advocacy Officer at Minnesota Credit Union Network, noted that while this law is crucial, it does not conclude the dialogue on crypto custody regulations.
“Financial institutions providing these services must adhere to various federal regulations, as cryptocurrency custodians are obligated to establish anti-money laundering (AML) protocols, submit Suspicious Activity Reports (SARs), and perform enhanced know-your-customer (KYC) checks,” he stated.
Although digital assets are not covered by federal FDIC or NCUA insurance, local institutions are working on private compliance alternatives. Schwirtz confirmed that St. Cloud Financial Credit Union has secured a strategic insurance partnership with a Lloyd’s of London-backed solution specifically designed for their custody operations.
Although further developments are necessary, state Representative Steve Elkins (DFL) celebrated the new law as a significant step forward, indicating a notable change in the management of digital assets.
“Community banks and credit unions sought to offer this service for their customers and members as part of a comprehensive range of financial services,” Elkins, one of the bill's three authors, informed CoinDesk.
This legislative change coincided with a crackdown on crypto ATMs and kiosks throughout the state. Governor Walz also signed a bipartisan bill (SF 3868) that enforces a statewide prohibition on these ATMs, effective August 1. Notably, Bitcoin Depot, one of the largest bitcoin ATM operators in the U.S., recently filed for bankruptcy.
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