Minnesota Governor Tim Walz has signed HF 3709 into law, making the state the first in the Midwest to establish a unified legislative framework allowing both state-chartered banks and credit unions to offer regulated crypto custody services.
The law takes effect August 1, 2026.
What the law requires
Under the new rules, state-chartered banks can provide virtual asset custody in a fiduciary or nonfiduciary capacity, while credit unions may operate in a custodial nonfiduciary capacity.
Institutions must maintain written policies covering risk management, internal controls, and cybersecurity, and must submit a 60-day advance written notice to the Minnesota Commissioner of Commerce before launching any custody services.
Crucially, customer digital assets must be kept fully segregated from the institution’s own holdings and cannot be treated as bank property.
Rep. Steve Elkins, one of the bill’s authors, said the law addresses a real gap in consumer protection:
“Personally, I know people who have essentially lost their cryptocurrency accounts because they misplaced their account ID or password. That wouldn’t happen if their bank or credit union was acting as a custodian for their account information.”
Joining other states
Minnesota joins New York, Wyoming, and Virginia, which already have similar crypto custody frameworks in place.
The state is notable for being the first in the Midwest to pass a unified law covering both banks and credit unions under a single framework, rather than addressing them separately.
The Minnesota Credit Union Network said the legislation gives residents a “safer way to manage crypto” by strengthening protections against fraud, hacks, and loss through regulatory oversight.
ATM ban runs alongside custody expansion
At the same time, Walz signed a separate bipartisan bill, SF 3868, banning all crypto ATMs and kiosks statewide, also effective August 1.
Existing kiosks must be removed by December 31.
Rep. Erin Koegel, who authored the House version of the ban, said the machines had become”
A tool for scammers to target some of our most vulnerable neighbors, especially seniors living on fixed incomes.
The regulatory pressure on crypto ATMs has already claimed one major casualty — Bitcoin Depot, one of the largest bitcoin ATM operators in the U.S., filed for Chapter 11 bankruptcy this week.
