Minnesota has officially enacted a new virtual asset law, paving the way for local banks and credit unions to offer cryptocurrency custody services. The legislation, which takes effect on August 1, positions Minnesota as the first state in the Midwest—and only the fourth in the United States, after Wyoming, Virginia, and New York—to establish a clear legal framework for digital asset custody.
Scope and requirements of the new law
Under the new rules, state-chartered banks can offer crypto asset custody to customers either as a fiduciary or a non-fiduciary service. Credit unions, on the other hand, are limited to providing non-fiduciary custody only. These custody services include safeguarding both digital assets themselves and the cryptographic private keys associated with them. The law strictly separates customer assets from those of the financial institution, ensuring that client holdings are not considered the property of the bank or credit union.
Financial institutions planning to launch custody services will be required to submit detailed plans to the State Commerce Commissioner at least 60 days in advance. These plans must outline internal risk management and cybersecurity policies in depth.
Credit unions and regulatory clarity
St. Cloud Financial Credit Union welcomed the new law, emphasizing that it brings a clear regulatory framework designed to bolster cybersecurity, compliance, and member protection for credit unions throughout the state. The union highlighted that these changes will enable them to provide safer digital asset storage options in a rapidly evolving financial landscape.
The institution summarized its approach, stating, “This law brings consumers closer to safer and more reliable options within regulated finance, while ensuring credit unions remain relevant in a fast-changing financial world.”
Comprehensive ban on crypto ATMs
Alongside the new custody framework, Minnesota has also passed a sweeping ban on cryptocurrency ATMs and kiosks, effective August 1. The law governs all crypto machines within state borders and received bipartisan support in the state legislature.
Representative Erin Koegel, who authored the legislation, emphasized that these devices have increasingly been used to exploit vulnerable groups, particularly elderly residents with fixed incomes, as tools for scams. The main aim of the ban is to enhance consumer protection by removing these risky devices from public use.
In the wake of these developments, Bitcoin Depot—one of the largest bitcoin ATM operators in the United States—filed for bankruptcy on Monday, reflecting the immediate market impact of the new restrictions.
Background and stated objectives
According to the Minnesota Credit Union Network, the new law marks a significant step toward reducing fraud, cyberattacks, and the risk of loss in crypto asset management. The dual initiatives—regulating custody services and banning ATMs—demonstrate a comprehensive and cautious approach by state authorities.
Through these measures, Minnesota aims to bolster consumer confidence in a segment often characterized by regulatory uncertainty and high-profile security incidents. Lawmakers and industry participants alike suggest that the state’s multi-pronged strategy could serve as a model for other regions navigating the future of digital assets.
