Minnesota has enacted legislation permitting banks and credit unions to provide cryptocurrency custody services, effective 1 August 2026.
Signed into law on 16 May 2026, HF 3709 authorises `certain virtual-currency custody services to be offered and performed` by qualifying financial institutions.
Under the legislation, banks and credit unions are required to maintain written policies covering risk management, internal controls, and security. Institutions must also submit written notice to the Minnesota Commissioner of Commerce at least 60 days before commencing crypto custody services, including details of their risk management frameworks. The law further requires segregation of client assets from the institution's own holdings.
Regulatory context and rationale
The legislation positions Minnesota alongside a group of US states that have moved to permit bank-level crypto custody under state supervision. New York, Wyoming, and Virginia have established comparable frameworks. Proponents of HF 3709 have indicated that the measure is intended to ensure Minnesota-based financial institutions can serve customers seeking digital asset custody, rather than leaving residents dependent on unregulated out-of-state or offshore providers.
In addition, the Minnesota Credit Union Network has noted that the law is designed to strengthen consumer protections against fraud, hacks, and loss through regulatory oversight, reflecting a broader policy rationale of channelling crypto activity into supervised entities.
Simultaneous restriction on crypto ATMs
Minnesota's legislative activity on digital assets this month has not been limited to custody. Earlier in May 2026, the state enacted a separate bill, SF 3868, banning crypto ATMs and kiosks across the state. Under that measure, no new crypto ATM installations are permitted from 1 August 2026, and all existing kiosks must cease operations and be removed by 31 December 2026.
The ATM prohibition reflects a distinct regulatory concern. Canada announced in its spring 2026 economic update a similar planned ban on crypto ATMs, citing their use in fraud and money laundering. In the US, the regulatory pressure on crypto ATM operators has had direct commercial consequences: Bitcoin Depot, one of the sector's operators, filed for Chapter 11 bankruptcy and announced the wind-down of its business in May 2026.
Taken together, Minnesota's two pieces of legislation illustrate a bifurcated approach to crypto regulation at the state level: expanding access through regulated institutional channels while restricting consumer-facing infrastructure associated with higher fraud risk. This pattern aligns with a broader trajectory seen across several US states, where the focus is shifting from broad prohibition or permissiveness towards differentiated oversight based on the nature of the service and the type of provider.
