Banking institution are under the regulation of the central bank and central bank is created by the government, so why would a government allow bitcoin to be a reserve, it's risky asset and banks are usually insured by the government so it does not really make sense.
I understand that other private institution are doing that, but banks, I doubt they win.
They would create their own centralized digital coins but would not trust or allow bitcoin to be their reserved.
I agree with the statement. If central bank and government will use that kind of method how will they regulate the money? I bet they won't do that. Fiat currencies are way too different with crypto and government can't just put their assets into a thing that is not controlled by anyone or anything. They won't like uncertainty. Central bank has a different concept from bitcoin so the future is bleak in terms of government institutions relying on crypto.