Minnesota Governor Tim Walz signed HF 3709 into law on Friday, allowing banks and credit unions to offer cryptocurrency custody services under a new regulatory framework effective August 1, 2026. The state is now part of a growing list of US jurisdictions bringing digital asset services under clearer regulatory oversight. At the same time, Minnesota enacted SF 3868, which bans crypto ATMs and kiosks statewide due to concerns over fraud, scams, and money laundering. The dual approach reflects the state's effort to balance consumer access to regulated crypto services while restricting higher-risk distribution channels.
## Compliance and Security Requirements
Under HF 3709, banks and credit unions must establish written policies addressing risk management, internal controls, cybersecurity procedures, and operational safeguards before offering crypto custody services. Financial institutions are required to notify the Minnesota Commissioner of Commerce at least 60 days before launching these services and must provide details about their risk management frameworks as part of the approval process.
## Asset Segregation Mandate
A key element of the legislation requires that customer crypto assets remain fully segregated from the institution's own holdings. This provision is designed to reduce risks tied to insolvency, misuse of funds, or operational failures.
## Industry Support and Rationale
Representative Bernie Perryman, one of the primary authors of the bill, stated that the goal was to ensure Minnesota-based financial institutions can grow alongside changing customer demand. Supporters argue the legislation gives residents safer access to crypto services through regulated local institutions instead of forcing them to rely on offshore exchanges or less regulated providers. The Minnesota Credit Union Network backed the legislation, stating it will help reduce fraud risks, hacks, and losses by bringing crypto custody under a regulated framework.
## Crypto ATM Ban Timeline
Under SF 3868, beginning August 1, no new crypto ATMs may be installed. All existing machines must cease operations and be removed by December 31. State officials cited fraud, scams, and money laundering linked to crypto ATMs as the primary reason for the ban.
