Cryptopolitan
2026-05-18 22:31:31
2026-05-18 22:31:31
Minnesota says no to crypto kiosks, greenlights banks for crypto custody
Minnesota Governor Tim Walz has signed new legislation that authorizes state-chartered banks and credit unions to hold Bitcoin and other digital assets for customers. However, a few days earlier, the governor signed into law a separate bill that now bans cryptocurrency kiosks across the state. Both measures take effect August 1, 2026. The custody bill, HF 3709, went through the state’s legislature and received a relatively high bipartisan backing. The bill went through a vote on April 30, when the House approved it 130-4. The next stop was at the Senate, which passed the amended version 51-16 on May 6, and the House concurred with those amendments 119-6 on May 11. What can Minnesota banks do with crypto? Financial institutions that opt in can safeguard, control, or administer virtual currencies in a fiduciary or custodial capacity. However, the law does not extend to trading, investing, or lending digital assets. Institutions that want to launch custody services must file a written notice with the Minnesota Department of Commerce at least 60 days in advance. The institutions are also required to maintain policies covering risk management, cybersecurity, internal controls, and business continuity. Also, they are prohibited from mixing customer holdings with the institution’s own assets. Under the new law, banks and credit unions can hire qualified third-party custodians but remain on the hook for compliance. The Department of Commerce retains authority to shut down services it deems unsafe or unsound. Rep. Bernie Perryman, who sponsored the House version, framed the bill as a competitive necessity. Local institutions pointed to direct demand from members. St. Cloud Financial Credit Union told lawmakers that roughly 20% of its members already own crypto but lack a trusted, regulated local option for storage, often turning to out-of-state or unregulated platforms. With this law coming into effect in August, the union members may now have the solutions delivered to them. The Minnesota Credit Union Network and the Department of Commerce both backed the bill, citing consumer protection and alignment with existing federal guidance on bank custody services. Kiosk ban targets fraud against seniors The custody authorization arrived alongside SF 3868, a separate measure Walz signed on May 5 that outlaws virtual-currency kiosks statewide. Operators must decommission existing machines by August 1. That ban followed months of testimony from law enforcement across the state. Minnesota had roughly 400 licensed kiosk locations, found in gas stations, laundromats, and grocery stores. However, scammers used the machines to trick victims, disproportionately older adults, into converting cash to crypto under false pretenses, according to MinnPost . Faribault police reported over $500,000 in kiosk-related losses since 2022. Apple Valley recorded more than $248,000 lost in two years. Minneapolis police investigated $82,000 in Bitcoin kiosk fraud in 2025 alone. Sam Smith, the Department of Commerce’s government affairs director, told lawmakers the average loss per reported kiosk scam in Minnesota was $6,700. Only 48% of victims recovered any money, and those who did got back an average of just 16% of what they lost. Minnesota joins Indiana and Tennessee as the third state to pass an outright kiosk ban. Tennessee’s House Bill 2505, signed by Governor Bill Lee on April 13, criminalized kiosk operation as a Class A misdemeanor, Cryptopolitan previously reported . The law did not receive support from all quarters, especially from kiosk operators, with Larry Lipka, general counsel for kiosk operator CoinFlip, which runs 50 machines in Minnesota, stating that scammers exploit many payment channels and that tighter regulation, not a ban, is the better path. Standard Chartered rides crypto custody wave Minnesota is part of a growing cohort of states carving out formal custody roles for community banks and credit unions. Wyoming created a special-purpose depository institution charter. Nebraska built a digital asset banking framework. Minnesota’s version is not as expansive as the others, as it only extends authority to existing institutions rather than creating new charter types. In another development that reflects increasing institutional appetite for crypto custody, Standard Chartered has announced a deal to acquire digital asset custodian Zodia Custody , aiming to fold the service into its financing and securities business. It is not yet known if Standard Chartered plans on launching custodial services in Minnesota. However, how financial institutions leverage the latest law looks to be seen. Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free .
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