Minnesota Takes Dual Approach to Crypto: Authorizes Bank Custody While Prohibiting ATMs

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On May 16, Minnesota Governor Tim Walz enacted House File 3709, authorizing state-chartered financial institutions to provide cryptocurrency custody services effective August 1.
The legislation mandates strict segregation between customer digital assets and institutional holdings.
Financial institutions must provide 60-day advance notification to the Minnesota Commissioner of Commerce before launching crypto services.
Simultaneously, Minnesota implemented a statewide prohibition on cryptocurrency ATMs and kiosks, also beginning August 1, due to fraud concerns.
Minnesota establishes itself as the Midwest’s pioneering state with comprehensive legislative guidelines for cryptocurrency custody across banks and credit unions.

Minnesota has established itself as the Midwest’s trailblazer by enacting comprehensive legislation that permits both banks and credit unions to provide cryptocurrency custody services to clients. Governor Tim Walz authorized House File 3709, with implementation scheduled for August 1.

Minnesota Legalizes Crypto Custody for Banks 🇺🇸
Governor Tim Walz has signed HF 3709 into law, allowing banks & credit unions in Minnesota to offer virtual-currency custody services.
✅ Banks can legally safekeep crypto & private keys
✅ Passed with strong bipartisan support… pic.twitter.com/XXChZIRuE4
— Crypto Patel (@CryptoPatel) May 19, 2026

Authorized Services Under New Legislation

State-chartered banking institutions may provide cryptocurrency custody services in either fiduciary or nonfiduciary arrangements. Credit unions, however, are restricted to nonfiduciary capacities exclusively. Both institution types may engage third-party vendors or subcustodians to facilitate these operations.

A critical stipulation exists: client digital assets must remain entirely segregated from institutional assets. Under no circumstances can these funds be classified as institutional property.

Prior to launching cryptocurrency custody services, institutions must submit written notification to the Minnesota Commissioner of Commerce with a minimum 60-day lead time. This notification must detail the institution’s risk mitigation strategies and cybersecurity protocols.

The legislation characterizes crypto custody as the protection, control, or administration of digital assets or their associated cryptographic private keys.

State Representative Steve Elkins, a principal author of the bill, noted that community financial institutions advocated for this capability to deliver comprehensive financial services to their clientele. He emphasized a practical consideration: individuals frequently lose cryptocurrency access when credentials or account identifiers are misplaced. Institutional custodianship would mitigate this vulnerability.

Minnesota’s Financial Institution Landscape

As of May 2025, Minnesota’s financial sector included 240 federally insured commercial banks with approximately $128 billion in combined assets. Additionally, 82 credit unions operated under the Minnesota Credit Union Network umbrella. U.S. Bancorp, ranked as the nation’s seventh-largest bank by total assets, maintains its headquarters in Minneapolis.

The St. Cloud Financial Credit Union stated that the legislation establishes transparent regulatory guidelines for cryptocurrency custody within supervised environments emphasizing security, stability, digital protection, and member safeguarding.

Cryptocurrency ATM Prohibition

Coinciding with the custody law’s implementation, Minnesota enacted a statewide prohibition on crypto ATMs and kiosks, with enforcement beginning August 1.

State Representative Erin Koegel, who sponsored the House prohibition measure, explained that these machines had evolved into instruments exploited by fraudsters targeting susceptible populations, especially elderly individuals on limited budgets.

Bitcoin Depot, among America’s largest bitcoin ATM operators, declared Chapter 11 bankruptcy during the same period. The company’s equity value plummeted 71 percent in premarket transactions following the announcement.

Concurrent Federal Developments

At the federal level, cryptocurrency enterprises have similarly pursued banking authorizations. 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 or conditionally approved comparable applications from Ripple Labs, BitGo, Circle, Fidelity Digital Assets, and Paxos.

The OCC is currently evaluating a charter application from World Liberty Financial, co-established by President Donald Trump and his sons.

Minnesota’s legislation positions the state among the initial jurisdictions establishing formal cryptocurrency custody frameworks, alongside Wyoming, Virginia, and New York.