Minnesota has enacted legislation permitting banks and credit unions to offer cryptocurrency custody services. Governor Tim Walz signed HF 3709 into law on Friday, marking the state's formal entry into crypto custody regulation. The bill takes effect on August 1, 2026. According to Rep. Bernie Perryman, one of the bill's main authors, the legislation ensures Minnesota-based financial institutions can "evolve alongside their customers and members," rather than forcing residents to rely on unregulated out-of-state or offshore providers.
## Compliance and Operational Requirements
Banking institutions and credit unions offering crypto custody services must maintain written policies governing risk management, internal controls, and security. Institutions are required to submit written notice—including details of their risk management frameworks—to the Minnesota Commissioner of Commerce at least 60 days before commencing crypto custody services. The bill also mandates that banks and credit unions ensure the segregation of client assets from the institutions' own assets.
## Industry Support and Legislative Intent
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. Rep. Perryman emphasized that the bill addresses the need for regulated alternatives to offshore solutions, enabling state-chartered institutions to compete while maintaining consumer protections.
## National Regulatory Context
Minnesota joins a growing list of states permitting certain banks to provide crypto custody services. New York, Wyoming, and Virginia already have similar regulations in place, establishing a precedent for state-level crypto custody frameworks.
## Parallel Crypto ATM Legislation
Minnesota enacted a second crypto-related bill earlier this month through SF 3868, which bans cryptocurrency ATMs and kiosks across the state. As of August 1, 2026, no new crypto ATMs can be installed, and existing kiosks may no longer operate. Operators must remove all crypto kiosks by December 31, 2026.
## Broader Industry Impact
The regulatory environment surrounding crypto ATMs has shifted internationally. The Canadian government announced in its spring economic update that it plans to ban crypto ATMs, citing their role in fraud and money laundering. These regulatory developments contributed to Bitcoin ATM operator Bitcoin Depot filing for Chapter 11 bankruptcy, as announced Monday.
