diff --git a/PENDING.md b/PENDING.md
index e57abc87e9b1..c3674bdfcea0 100644
--- a/PENDING.md
+++ b/PENDING.md
@@ -50,6 +50,8 @@ IMPROVEMENTS
 
 * Gaia
   * [\#3158](https://github.com/cosmos/cosmos-sdk/pull/3158) Validate slashing genesis
+  * [\#3172](https://github.com/cosmos/cosmos-sdk/pull/3172) Support minimum fees
+  in a local testnet.
 
 * SDK
   * [\#3137](https://github.com/cosmos/cosmos-sdk/pull/3137) Add tag documentation
@@ -71,8 +73,9 @@ BUG FIXES
 * Gaia CLI  (`gaiacli`)
 
 * Gaia
-
   * \#3148 Fix `gaiad export` by adding a boolean to `NewGaiaApp` determining whether or not to load the latest version
+  * [\#3172](https://github.com/cosmos/cosmos-sdk/pull/3172) Fix parsing `gaiad.toml`
+  when it already exists.
 
 * SDK
 
diff --git a/baseapp/baseapp.go b/baseapp/baseapp.go
index 0aff240ea7c7..19944ced2f46 100644
--- a/baseapp/baseapp.go
+++ b/baseapp/baseapp.go
@@ -213,8 +213,7 @@ func (app *BaseApp) initFromMainStore(mainKey *sdk.KVStoreKey) error {
 	return nil
 }
 
-// SetMinimumFees sets the minimum fees.
-func (app *BaseApp) SetMinimumFees(fees sdk.Coins) { app.minimumFees = fees }
+func (app *BaseApp) setMinimumFees(fees sdk.Coins) { app.minimumFees = fees }
 
 // NewContext returns a new Context with the correct store, the given header, and nil txBytes.
 func (app *BaseApp) NewContext(isCheckTx bool, header abci.Header) sdk.Context {
diff --git a/baseapp/options.go b/baseapp/options.go
index 6e4104e506b8..9ec9db023897 100644
--- a/baseapp/options.go
+++ b/baseapp/options.go
@@ -37,7 +37,7 @@ func SetMinimumFees(minFees string) func(*BaseApp) {
 	if err != nil {
 		panic(fmt.Sprintf("invalid minimum fees: %v", err))
 	}
-	return func(bap *BaseApp) { bap.SetMinimumFees(fees) }
+	return func(bap *BaseApp) { bap.setMinimumFees(fees) }
 }
 
 func (app *BaseApp) SetName(name string) {
diff --git a/cmd/gaia/init/testnet.go b/cmd/gaia/init/testnet.go
index a885226ce263..a5bca72c5107 100644
--- a/cmd/gaia/init/testnet.go
+++ b/cmd/gaia/init/testnet.go
@@ -10,15 +10,16 @@ import (
 	"github.com/cosmos/cosmos-sdk/client"
 	"github.com/cosmos/cosmos-sdk/cmd/gaia/app"
 	"github.com/cosmos/cosmos-sdk/codec"
+	srvconfig "github.com/cosmos/cosmos-sdk/server/config"
 	sdk "github.com/cosmos/cosmos-sdk/types"
 	"github.com/cosmos/cosmos-sdk/x/auth"
 	authtx "github.com/cosmos/cosmos-sdk/x/auth/client/txbuilder"
 	"github.com/cosmos/cosmos-sdk/x/stake"
-	stakeTypes "github.com/cosmos/cosmos-sdk/x/stake/types"
+	staketypes "github.com/cosmos/cosmos-sdk/x/stake/types"
 
 	"github.com/spf13/cobra"
 	"github.com/spf13/viper"
-	cfg "github.com/tendermint/tendermint/config"
+	tmconfig "github.com/tendermint/tendermint/config"
 	"github.com/tendermint/tendermint/crypto"
 	cmn "github.com/tendermint/tendermint/libs/common"
 	"github.com/tendermint/tendermint/types"
@@ -34,6 +35,7 @@ var (
 	flagNodeDaemonHome    = "node-daemon-home"
 	flagNodeCliHome       = "node-cli-home"
 	flagStartingIPAddress = "starting-ip-address"
+	flagMinimumFees       = "minimum-fees"
 )
 
 const nodeDirPerm = 0755
@@ -76,13 +78,19 @@ Example:
 	cmd.Flags().String(flagStartingIPAddress, "192.168.0.1",
 		"Starting IP address (192.168.0.1 results in persistent peers list ID0@192.168.0.1:46656, ID1@192.168.0.2:46656, ...)")
 
-	cmd.Flags().String(client.FlagChainID, "", "genesis file chain-id, if left blank will be randomly created")
+	cmd.Flags().String(
+		client.FlagChainID, "", "genesis file chain-id, if left blank will be randomly created",
+	)
+	cmd.Flags().String(
+		flagMinimumFees, fmt.Sprintf("1%s", staketypes.DefaultBondDenom), "Validator minimum fees",
+	)
 
 	return cmd
 }
 
-func initTestnet(config *cfg.Config, cdc *codec.Codec) error {
+func initTestnet(config *tmconfig.Config, cdc *codec.Codec) error {
 	var chainID string
+
 	outDir := viper.GetString(flagOutputDir)
 	numValidators := viper.GetInt(flagNumValidators)
 
@@ -95,6 +103,9 @@ func initTestnet(config *cfg.Config, cdc *codec.Codec) error {
 	nodeIDs := make([]string, numValidators)
 	valPubKeys := make([]crypto.PubKey, numValidators)
 
+	gaiaConfig := srvconfig.DefaultConfig()
+	gaiaConfig.MinFees = viper.GetString(flagMinimumFees)
+
 	var (
 		accs     []app.GenesisAccount
 		genFiles []string
@@ -181,14 +192,14 @@ func initTestnet(config *cfg.Config, cdc *codec.Codec) error {
 			Address: addr,
 			Coins: sdk.Coins{
 				sdk.NewInt64Coin(fmt.Sprintf("%stoken", nodeDirName), 1000),
-				sdk.NewInt64Coin(stakeTypes.DefaultBondDenom, 150),
+				sdk.NewInt64Coin(staketypes.DefaultBondDenom, 500),
 			},
 		})
 
 		msg := stake.NewMsgCreateValidator(
 			sdk.ValAddress(addr),
 			valPubKeys[i],
-			sdk.NewInt64Coin(stakeTypes.DefaultBondDenom, 100),
+			sdk.NewInt64Coin(staketypes.DefaultBondDenom, 100),
 			stake.NewDescription(nodeDirName, "", "", ""),
 			stake.NewCommissionMsg(sdk.ZeroDec(), sdk.ZeroDec(), sdk.ZeroDec()),
 		)
@@ -213,6 +224,9 @@ func initTestnet(config *cfg.Config, cdc *codec.Codec) error {
 			_ = os.RemoveAll(outDir)
 			return err
 		}
+
+		gaiaConfigFilePath := filepath.Join(nodeDir, "config/gaiad.toml")
+		srvconfig.WriteConfigFile(gaiaConfigFilePath, gaiaConfig)
 	}
 
 	if err := initGenFiles(cdc, chainID, accs, genFiles, numValidators); err != nil {
@@ -261,7 +275,7 @@ func initGenFiles(
 }
 
 func collectGenFiles(
-	cdc *codec.Codec, config *cfg.Config, chainID string,
+	cdc *codec.Codec, config *tmconfig.Config, chainID string,
 	monikers, nodeIDs []string, valPubKeys []crypto.PubKey,
 	numValidators int, outDir, nodeDirPrefix, nodeDaemonHomeName string,
 ) error {
diff --git a/server/config/toml.go b/server/config/toml.go
index 3c60fbdf93fb..fc2078cb44ec 100644
--- a/server/config/toml.go
+++ b/server/config/toml.go
@@ -21,13 +21,13 @@ var configTemplate *template.Template
 
 func init() {
 	var err error
-	tmpl := template.New("cosmosConfigFileTemplate")
+	tmpl := template.New("gaiaConfigFileTemplate")
 	if configTemplate, err = tmpl.Parse(defaultConfigTemplate); err != nil {
 		panic(err)
 	}
 }
 
-// ParseConfig retrieves the default environment configuration for Cosmos.
+// ParseConfig retrieves the default environment configuration for Gaia.
 func ParseConfig() (*Config, error) {
 	conf := DefaultConfig()
 	err := viper.Unmarshal(conf)
diff --git a/server/util.go b/server/util.go
index 5c07d1b465c3..4e834ce10d6b 100644
--- a/server/util.go
+++ b/server/util.go
@@ -103,18 +103,15 @@ func interceptLoadConfig() (conf *cfg.Config, err error) {
 		conf, err = tcmd.ParseConfig() // NOTE: ParseConfig() creates dir/files as necessary.
 	}
 
-	cosmosConfigFilePath := filepath.Join(rootDir, "config/gaiad.toml")
-	viper.SetConfigName("cosmos")
-	_ = viper.MergeInConfig()
-	var cosmosConf *config.Config
-	if _, err := os.Stat(cosmosConfigFilePath); os.IsNotExist(err) {
-		cosmosConf, _ := config.ParseConfig()
-		config.WriteConfigFile(cosmosConfigFilePath, cosmosConf)
+	// create a default gaia config file if it does not exist
+	gaiaConfigFilePath := filepath.Join(rootDir, "config/gaiad.toml")
+	if _, err := os.Stat(gaiaConfigFilePath); os.IsNotExist(err) {
+		gaiaConf, _ := config.ParseConfig()
+		config.WriteConfigFile(gaiaConfigFilePath, gaiaConf)
 	}
 
-	if cosmosConf == nil {
-		_, err = config.ParseConfig()
-	}
+	viper.SetConfigName("gaiad")
+	err = viper.MergeInConfig()
 
 	return
 }