Opening
Minnesota has enacted legislation permitting banks and credit unions to offer cryptocurrency custody services, marking the state's formal entry into regulated crypto financial services. Governor Tim Walz signed bill HF 3709 on Friday, with the legislation set to take effect on August 1, 2026. The bill enables "certain virtual-currency custody services to be offered and performed" by state financial institutions, addressing the need for regulated alternatives to unregulated out-of-state and offshore providers. Rep. Bernie Perryman, a main author of the bill, stated that HF 3709 allows Minnesota-based financial institutions to "evolve alongside their customers and members." The regulatory move reflects a broader trend among U.S. states examining the legal boundaries of crypto-related services, with New York, Wyoming, and Virginia already operating similar frameworks.
## Compliance Requirements
Banking institutions and credit unions offering crypto custody services must maintain written policies governing risk management, internal controls, and security, among other compliance measures. The bill also requires institutions to ensure the segregation of client assets from the institutions' own assets—a critical safeguard for customer protection.
## Regulatory Approval Process
Financial institutions must submit written notice to the Minnesota Commissioner of Commerce at least 60 days before commencing crypto custody services. This notice must include details of their risk management frameworks and other compliance documentation.
## Industry Response
The Minnesota Credit Union Network, a state trade association, stated Friday that the legislation "gives Minnesotans a safer way to manage crypto" and strengthens protections against fraud, hacks, and loss through regulatory oversight.
## Comparative Landscape
Minnesota joins a growing list of states that have permitted certain banks to provide crypto custody services. New York, Wyoming, and Virginia already have similar regulations in place.
## Minnesota Crypto ATM Ban
Separately, Minnesota enacted bill SF 3868 earlier this month, which bans crypto ATMs and kiosks across the state. As of August 1, no new crypto ATMs can be installed, and existing kiosks may no longer operate. Operators must remove all crypto kiosks by December 31.
The Canadian government also announced in its spring economic update that it plans to ban crypto ATMs, citing their role in fraud and money laundering.
