Direct Custody and then Managed custody. Managing and holding your Bitcoin yourself to some persons is a no brainer. However, ever thought of the prospect of financial institutions holding and managing it, much like a flat currency. Can't help but wonder about the securities and convenience that comes with such. Would such a move increase the usage and adoption of Bitcoin? Knowing it can be held by banks? Well.. you can say so. Never forget such a move will kill one of Bitcoins character; Decentralization. Which move could be riskier; trusting yourself or financial institutions?
Self-custody and third-party custody will always exist side by side. True Bitcoiners who believe in the decentralization goal of the currency will always want to have full control over their wallets' private keys. They are guided by the golden rule of "Not your keys, not your coins."
There is also another set who see keeping their keys as a great risk and prefer to keep their asset in the custody of centralized institutions. This was where Bitcoin adoption increased when the US approved the ETF. If banks get the approval to keep Bitcoin, more people might also prefer to save their coins with them because they are regulated by the government and also insured.
Which move could be riskier; trusting yourself or financial institutions?
The risk involved in keeping Bitcoin in banks is not just about financial losses. Banks are insured by the Deposit Insurance Corporation so depositors can always get back their funds even if the bank goes bankrupt. My main problem is my freedom and privacy. I don't want any institution to control how I use my money. I also don't want people to know how much I am worth. Some corrupt bank staff give criminals information about the financial status of customers.