Minnesota Governor Tim Walz signed House File 3709 into law, permitting 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 crypto custody framework, while also banning crypto ATMs and kiosks statewide on the same date.
Custody Roles and Institutional Rules
Under the law, state-chartered banks can offer crypto custody services in both fiduciary and nonfiduciary capacities. Credit unions, however, are limited to nonfiduciary custody only. Institutions may work with third-party service providers and subcustodians, but customer digital assets must remain fully separated from institutional holdings at all times — no commingling allowed.
Before launching custody services, institutions must notify the Minnesota Commissioner of Commerce at least 60 days in advance, including cybersecurity and risk management plans. The law defines crypto custody as controlling, managing, or safeguarding digital assets and private cryptographic keys.
Legislative Push and Industry Support
State Representative Steve Elkins said community banks and credit unions backed the proposal to expand financial offerings. He highlighted a recurring problem of lost passwords or credentials, noting that regulated custodians could help customers avoid losing access to digital assets permanently.
Minnesota's financial sector is sizable. As of May 2025, the state had 240 insured commercial banks holding roughly $128 billion in assets, plus 82 credit unions under the Minnesota Credit Union Network. U.S. Bancorp, the seventh-largest U.S. bank by assets, is headquartered in Minneapolis. St. Cloud Financial Credit Union called the law a move toward a regulated environment focused on cybersecurity, safety, and member protection.
Crypto ATM Ban Takes Effect
Alongside the custody framework, Minnesota approved a statewide ban on crypto ATMs and kiosks. Representative Erin Koegel said scammers frequently target vulnerable residents, especially seniors, using these machines. The ban arrived as Bitcoin Depot, one of the largest U.S. crypto ATM operators, filed for Chapter 11 bankruptcy the same week.
On the federal level, crypto firms continue seeking bank 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.