- Bitcoins must be designated as "not illegal" so that institutions such as banks will accept them.
Irrelevant.... first whom would give such a designation? If BTC becomes prevalent, banks will accept them. But I am curious as to why you would put them in the "Bank" ( a centralized institution for control and protection of money). The whole purpose it that "Banks" would be useless other than for storing tangible objects.
But if you insist, I will hold onto your BTC and be your "Bank".... and loan out your BTC and the whole mess starts again...
The point of the transaction I described is to give money to a bank or some such institution in order to get a house. Who needs to give the designation of "not illegal" - the party who is receiving the funds, so they are willing to take them in the form of bitcoins. How they arrive at that designation will probably be a combination of seeing a large number of people using bitcoins, and some sort of legal case which involves bitcoins.
The point here is not to "put bitcoins in the bank", it is to "pay the bank with bitcoins".