- Minnesota banks and credit unions can begin offering crypto custody services starting August 1.
- The law requires customer digital assets to remain fully separated from institutional holdings.
- Minnesota will also ban all crypto ATMs and kiosks statewide due to rising fraud concerns.
Minnesota approved a new crypto custody law after Governor Tim Walz signed House File 3709, allowing banks and credit unions to hold digital assets for customers starting August 1. The law makes Minnesota the first Midwest state to create a unified framework for crypto custody while also banning crypto ATMs and kiosks across the state on the same date.
New Rules Set Custody Requirements
Under the law, state-chartered banks can offer crypto custody services in fiduciary and nonfiduciary capacities. However, credit unions can only provide custody services in a nonfiduciary role.
The legislation also allows institutions to work with third-party service providers and subcustodians. Still, customer digital assets must remain fully separated from institutional assets at all times.
Before launching custody services, institutions must notify the Minnesota Commissioner of Commerce at least 60 days in advance. The notice must include cybersecurity and risk management plans tied to crypto operations.
The law defines crypto custody as controlling, managing, or safeguarding digital assets and private cryptographic keys. According to state Representative Steve Elkins, community banks and credit unions supported the proposal to expand financial service offerings.
Elkins also pointed to a recurring issue involving lost passwords and account credentials. He said regulated custodians could help customers avoid losing access to digital assets.
Minnesota Banking Sector Faces Crypto Shift
The law affects a sizable financial sector within the state. As of May 2025, Minnesota had 240 insured commercial banks holding roughly $128 billion in assets.
Additionally, 82 credit unions operated under the Minnesota Credit Union Network. U.S. Bancorp, the nation’s seventh-largest bank by assets, is headquartered in Minneapolis.
Meanwhile, St. Cloud Financial Credit Union said the law establishes a regulated environment focused on cybersecurity, safety, and member protection.
Crypto ATM Ban Starts August 1
Alongside the custody framework, Minnesota also approved a statewide ban on crypto ATMs and kiosks beginning August 1. State Representative Erin Koegel said scammers frequently used the machines to target vulnerable residents, especially seniors.
The ban arrived during a difficult period for the crypto ATM sector. Bitcoin Depot, one of the country’s largest crypto ATM operators, filed for Chapter 11 bankruptcy the same week.
At the federal level, crypto firms continue pursuing banking approvals through the Office of the Comptroller of the Currency. Payward, Ripple Labs, BitGo, Circle, Fidelity Digital Assets, and Paxos have all pursued trust or custody-related approvals.
