The legislation requires financial institutions to implement risk management, cybersecurity, and compliance policies, while also ensuring customer crypto assets stay separate from company holdings. At the same time, the state enacted SF 3868, which bans crypto ATMs and kiosks statewide due to concerns over fraud, scams, and money laundering.
Minnesota Expands Crypto Banking Rules
Minnesota moved forward with legislation that allows banks and credit unions to offer cryptocurrency custody services. The state is now part of a growing list of US jurisdictions trying to bring digital asset services under clearer regulatory oversight.
Governor Tim Walz signed HF 3709 into law on Friday, and the new rules set to take effect on Aug. 1, 2026. The legislation gives financial institutions in the state the ability to provide custody solutions for cryptocurrencies, but also introduces compliance and security requirements that are designed to protect consumers.
(Source: Minnesota House of Representatives)
Under the law, banks and credit unions must establish written policies that address risk management, internal controls, cybersecurity procedures, and operational safeguards before they can begin offering crypto custody services. Institutions are also 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.
One of the key elements of the legislation is the requirement that customer crypto assets remain fully segregated from the institution’s own holdings. This provision is put in place to reduce risks tied to insolvency, misuse of funds, or operational failures.
Supporters of the bill argue that 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. Representative Bernie Perryman, one of the primary authors of the bill, said earlier this year that the goal was to ensure Minnesota-based financial institutions can grow alongside changing customer demand.
The Minnesota Credit Union Network also backed the legislation by saying it will help reduce fraud risks, hacks, and losses by bringing crypto custody under a regulated framework.
At the same time, Minnesota is a lot less welcoming of crypto ATMs. Earlier this month, the state enacted SF 3868, which effectively bans crypto ATMs and kiosks statewide.
Beginning Aug. 1, no new crypto ATMs may be installed, and all existing machines must cease operations and be removed by Dec. 31. State officials pointed to concerns about fraud, scams, and money laundering linked to crypto ATMs as a major reason for the ban.
