Minnesota has signed a new crypto custody law that lets banks and credit unions hold digital assets for customers from Aug. 1.
Summary
- Minnesota banks can hold crypto from Aug. 1 if they meet notice and control rules
- New law requires crypto segregation, cybersecurity policies, and state review before custody services launch statewide
- Crypto ATM ban starts same day, showing Minnesota’s split approach to digital asset access statewide
Gov. Tim Walz signed HF 3709 into law, allowing state-chartered banks and credit unions to offer virtual-currency custody services. The law covers the safekeeping, control, or management of virtual currency and private keys on behalf of another person.
The law takes effect on Aug. 1, 2026. It applies to crypto custody services that start on or after that date. Banks may offer the service in a fiduciary or nonfiduciary role, while credit unions may provide custody services to members under the same state and federal limits.
What rules must banks and credit unions follow?
The law requires any bank or credit union offering crypto custody to act in a safe and sound manner. Institutions must keep written policies for risk management, internal controls, cybersecurity, business continuity, and compliance.
Banks and credit unions must also send written notice to the Minnesota Commissioner of Commerce at least 60 days before launching the service. That notice must describe the services and the institution’s risk management framework.
The law also requires customer crypto assets and related control systems to stay separate from the institution’s own assets. Banks and credit unions may use qualified third-party service providers or subcustodians, but they must keep oversight responsibility.
Rep. Bernie Perryman, one of the bill’s authors, said HF 3709 would allow Minnesota financial institutions to “evolve alongside their customers and members” rather than push residents toward out-of-state or offshore providers.
Why is Minnesota also banning crypto ATMs?
The custody law comes as Minnesota moves in the opposite direction on crypto ATMs. Walz signed SF 3868 on May 5, banning virtual currency kiosks across the state. The ban takes effect on Aug. 1, 2026, and operators must remove public kiosks by Dec. 31, 2026.
The measure blocks the installation, operation, maintenance, or public use of virtual currency kiosks in Minnesota. Operators must also pay out customer funds before shutting down. Customers may receive U.S. dollars based on market value or crypto sent to a selected wallet.
The Minnesota Credit Union Network said the custody law gives residents “a safer way to manage crypto” through regulated institutions. That framing fits the state’s new approach: allow bank custody under supervision, while removing ATM channels tied to fraud concerns.
How does this fit wider crypto regulation?
Minnesota’s move comes as U.S. banks face clearer rules around digital asset services. Earlier reports noted that the OCC allowed regulated banks to buy, sell, and provide custody for crypto held for customers.
Crypto ATM pressure is also rising outside Minnesota. Canada has moved toward a crypto ATM ban over fraud concerns, while Bitcoin Depot filed for Chapter 11 bankruptcy after regulatory pressure, revenue decline, and security issues.
