Key Highlights
- On May 16, Governor Tim Walz approved House File 3709, granting state-chartered banks and credit unions permission to provide cryptocurrency custody services effective August 1.
- Financial institutions must maintain strict separation between client digital assets and their own holdings under the new regulations.
- A mandatory 60-day advance written notification to Minnesota’s Commerce Commissioner is required before institutions can launch these services.
- Simultaneously, the state implemented a complete prohibition on cryptocurrency ATMs and kiosks throughout Minnesota, taking effect the same date, due to fraud concerns.
- This legislation establishes Minnesota as the Midwest’s pioneer in creating comprehensive regulatory guidelines for digital asset custody across both banking types.
In a groundbreaking move, Minnesota has emerged as the Midwest’s trailblazer by enacting comprehensive legislation that permits both banks and credit unions to provide cryptocurrency custody services to their clients. With Governor Tim Walz’s signature on House File 3709, these provisions will become operative on August 1.
Scope and Provisions of the Legislation
Under the new framework, state-chartered banking institutions may provide digital asset custody services in either fiduciary or nonfiduciary arrangements. Credit unions, however, face more restrictive parameters and can only operate in a nonfiduciary capacity. Both types of institutions have authorization to engage third-party service providers or subcustodians to facilitate these operations.
A critical mandate within the legislation demands absolute segregation: customer digital assets must remain entirely distinct from institutional holdings. Under no circumstances can these funds be commingled with the institution’s proprietary assets.
Prior to launching cryptocurrency custody operations, financial institutions must submit written documentation to the Minnesota Commissioner of Commerce with a minimum 60-day lead time. This submission must detail comprehensive risk management strategies and cybersecurity protocols.
The statute characterizes crypto custody as encompassing the safeguarding, administration, or oversight of digital assets, including their associated cryptographic private keys.
State Representative Steve Elkins, a principal architect of the legislation, explained that community-based financial institutions advocated for this capability to deliver comprehensive financial solutions to their clientele. He highlighted a pragmatic consideration: individuals frequently lose access to their cryptocurrency holdings due to forgotten credentials or account information. Institutional custodianship addresses this vulnerability.
Minnesota’s Financial Services Landscape
According to May 2025 figures, Minnesota’s financial sector encompasses 240 federally insured commercial banks managing approximately $128 billion in combined assets. Additionally, 82 credit unions function through the Minnesota Credit Union Network. Notably, U.S. Bancorp, ranked as America’s seventh-largest financial institution by total assets, maintains its corporate headquarters in Minneapolis.
The St. Cloud Financial Credit Union expressed support for the legislation, noting it establishes well-defined regulatory parameters for cryptocurrency custody within supervised environments emphasizing security, operational integrity, cyber protection, and member safeguards.
Simultaneous ATM Prohibition
Coinciding with the custody law’s implementation, Minnesota enacted a comprehensive ban on crypto ATMs and kiosks across the entire state, with enforcement also beginning August 1.
State Representative Erin Koegel, who championed the House version of the prohibition, stated these machines had evolved into instruments exploited by fraudsters targeting susceptible populations, especially elderly individuals subsisting on fixed retirement incomes.
Bitcoin Depot, among the nation’s leading bitcoin ATM operators, declared Chapter 11 bankruptcy during the same timeframe. The company’s shares plummeted 71 percent during premarket trading hours following the announcement.
Concurrent Federal Developments
At the national level, cryptocurrency enterprises have similarly pursued banking authorization. Kraken’s parent entity, Payward, submitted an application to the Office of the Comptroller of the Currency seeking a national trust company charter. The OCC has previously granted approval or conditional approval to comparable applications from Ripple Labs, BitGo, Circle, Fidelity Digital Assets, and Paxos.
The OCC is currently evaluating a charter petition from World Liberty Financial, co-established by President Donald Trump alongside his sons.
Minnesota’s legislative action positions the state within an emerging group of jurisdictions establishing formal structures for cryptocurrency custody, alongside Wyoming, Virginia, and New York.
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