If FDIC provided insurance up to 2.0 BTC, that would be more bullish than SBR

[RoseAPT]

I don’t understand why people keep wanting a SBR. We don’t need that. Especially if a future president or Congress can dump it at anytime in the future.

However, if banks can now hold crypto more easily, and FDIC can insure up to 2.0 BTC regardless of fiat value, I think we skyrocket and kill cycles forever. It brings stability into the market and trust.

BTC will now be backed by the federal government without them ever spending a dime on BTC.

There are trade offs, as you are no longer in self custody. But the FDIC insurance is as high level of trust as you can get besides cold storage. Better than an ETF, better than MSTR etc

Many people do not want the burden of self custody and ultimately I think this is one of the best, budget neutral ways that the government can send BTC to the moon

I would even consider this if it mean we can get BTC backed loans from tradfi banks, and our collateral is FDIC insured. We wouldn’t have to trust shady smart contracts or hacks in the traditional sense.

We would still have to trust the US government obviously, but that’s the main tradeoff for higher BTC adoption and much higher prices

[odolvlobo]

I don't think that FDIC insurance is appropriate in this case. FDIC is intended to protect the deposits of customers when a bank fails. Even though there are already many kinds of investments available through banks, the insurance only protects deposit accounts, and I don't think that will ever change.

On the other hand, SIPC is a similar kind of insurance for brokerages. Like FDIC, the insurance protects you if your investments (including Bitcoin ETFs) are held by a brokerage and the brokerage goes out of business or the investments are lost or stolen. I think this is what you are looking for, and it already exists.

What SIPC Protects

Anyway, I don't think that this kind of insurance would have any significant effect on the rate of adoption or the price, since the asset itself is not being backed.

[cr1776]

Yes, having a future President or Congress dump it in the future is certainly not a good thing.  It is probably too much to hope that all the politicians would see the value in maintaining it.  Many probably do see the benefits of it, but for the purposes of obtaining power over everyone else they would then dump it because it would interfere with their plans.  Just like the previous administration didn't like bitcoin because it gives power to the people and away from DC.

[Z-tight]

BTC will now be backed by the federal government without them ever spending a dime on BTC.

BTC is not backed by any government and that cannot happen, BTC is backed by its features, like decentralization, scarcity, etc. BTC is not centralized, so it cannot be backed by a centralized government.

Many people do not want the burden of self custody and ultimately I think this is one of the best, budget neutral ways that the government can send BTC to the moon

Self custody is not a burden, that is how BTC was designed to be used, with the owner being their own bank. If anyone sees self custody as a burden, i would not be wrong to say that they do not really understand what BTC is.

[Lucius]

~snip~
Many people do not want the burden of self custody and ultimately I think this is one of the best, budget neutral ways that the government can send BTC to the moon

What you wrote is true, because if we take into account that a maximum of about 5% of people in the world have ever invested in cryptocurrencies (not exclusively in BTC), then it is quite clear what the average person thinks about all this. Of course, some think it's all a big scam, others think it's too complicated, others simply don't understand anything and aren't financially literate enough to handle anything other than a plastic card and their PIN.

It does not seem logical to me that any government should facilitate investing in cryptocurrencies in this way, especially in BTC, which should be an alternative to their fiat currencies. The more "they" get involved in all of this, the more likely ordinary people will become to distance themselves from it - because at some point the impression will be created that "they" are actually controlling the game.

We should not forget about companies like BlackRock who entered this "business" with great expectations, not only in terms of the BTC ETF, but also in the way that they have already bought majority shares in the largest mining companies located in a country that has recently become super friendly towards cryptocurrencies.

[el kaka22]

If government distributed all their bitcoins to us, and took all the money rich have, and gave it to us, and if medicine never cost a dime, and if free food dropped down from the skies that would be a great world.

However, we live in a real world and sometimes we need to know how much we can safely assume could be done. Preferring bitcoin to be insured like that is a big ask, considering the volatility of it, we are talking about a huge deal here that would ruin a governments accounts and treasury so there is no way that any sane nation would do something like this, specially when they know it wouldn't bring them that much vote to help offset the people who will hate losing money because of this since it would cost a lot.

[RoseAPT]

If government distributed all their bitcoins to us, and took all the money rich have, and gave it to us, and if medicine never cost a dime, and if free food dropped down from the skies that would be a great world.

However, we live in a real world and sometimes we need to know how much we can safely assume could be done. Preferring bitcoin to be insured like that is a big ask, considering the volatility of it, we are talking about a huge deal here that would ruin a governments accounts and treasury so there is no way that any sane nation would do something like this, specially when they know it wouldn't bring them that much vote to help offset the people who will hate losing money because of this since it would cost a lot.

FDIC doesn't insure the value of the USD. FDIC merely provides protection in the case of a bank failure. The USD, as denominated in BTC terms, is equally volatile. Or USD denominated in SPY. Or USD denominated in Gold. To various extents obviously.

So I don't see your point in the volatility of BTC, one BTC = one BTC. One USD = One USD. Trading pairs between USD and BTC vs other assets go up/down all the time.

In a situation where the FDIC or another federal program insures BTC deposits, obviously the bank would need to have reserve requirements. Perhaps that requirement is 90% or something extremely high. Or it's 100%.

Doesn't really matter bc it's the backing of the US government that matters most in a situation where the reserve requirements are high.

[BenCodie]

Even if this were to be implemented, I would personally be very skeptical of whether or not a government agency would be able to provide a seamless claim process if a bank were to ever close its doors and those who held Bitcoin within were at a loss. If a bank were to mismanage or in some way "lose" the Bitcoin, to purchase the amount of Bitcoin that bank held would cost the government a hell of a lot of money (probably more than the market value) and it would need to buy it on market. It would probably cause an economic spiral (depending on the amount of Bitcoin stored), as the money would probably need to be borrowed (printed) too. This is also not to mention if the bank was even holding the Bitcoin reserves to begin with, and if what customers held were just Bitcoin on paper.

People should learn self-custody, not create frameworks and rules that only further reliance on banks. After all, one of the main points in Bitcoin was to reduce reliance on banks (arguably, to eliminate them altogether).

[tread93]

I don’t understand why people keep wanting a SBR. We don’t need that. Especially if a future president or Congress can dump it at anytime in the future.

However, if banks can now hold crypto more easily, and FDIC can insure up to 2.0 BTC regardless of fiat value, I think we skyrocket and kill cycles forever. It brings stability into the market and trust.

BTC will now be backed by the federal government without them ever spending a dime on BTC.

There are trade offs, as you are no longer in self custody. But the FDIC insurance is as high level of trust as you can get besides cold storage. Better than an ETF, better than MSTR etc

Many people do not want the burden of self custody and ultimately I think this is one of the best, budget neutral ways that the government can send BTC to the moon

I would even consider this if it mean we can get BTC backed loans from tradfi banks, and our collateral is FDIC insured. We wouldn’t have to trust shady smart contracts or hacks in the traditional sense.

We would still have to trust the US government obviously, but that’s the main tradeoff for higher BTC adoption and much higher prices

If they did do that at the current price that they do it for their USD guarantee which I believe is 250k. I agree that would be super bullish and honestly I'm sure many organizations are racing to try and come out with such a product. It would be very reassuring to many of the bitcoin skeptics.

[Publictalk792]

That is really interesting way to think about it and you have made good point about why having government FDIC insurance for Bitcoin in banks could be big deal maybe even bigger than Bitcoin ETF. You are right that Bitcoin ETF might not be safe in long run because future leaders could change rules. Just knowing government backs it even if they do not spend any money on Bitcoin could make huge difference in how people feel about it. You are right that kind of trust is hard to beat for many. Giving up control of your own Bitcoin is big thing and it is key idea for many Bitcoin fans. But you have explained well why some people might prefer ease and safety of FDIC insurance over having full control. Comparing it to ETFs and companies like MicroStrategy shows how this could be simpler and maybe safer way for big and small investors to get into Bitcoin.
Idea of getting loans from regular banks using your FDIC insured Bitcoin as security is also really interesting. It could make it easier to get money and connect Bitcoin more with traditional financial world so people might not have to rely as much on riskier online lending systems. It is practical way of looking at it knowing that not everyone wants to deal with responsibility of holding their own Bitcoin. While keeping your own Bitcoin is still core belief for many of us so they will always deny it.

[Fundamentals Of]

How I wish this would happen. If traditional banks can accept Bitcoin savings for custody and safekeeping and FDIC can provide insurance to it, this will definitely drive up adoption. The limit doesn't have to be 2 BTC. It can only be 1 BTC or even 0.5 BTC. That's good enough.

Many people who are interested in Bitcoin but cannot easily grasp the technical implications of self-custody, or are afraid to commit as their own bank, are likely to set aside the idea. But if the banks offer insurance to their Bitcoin savings, they will now be encouraged to get into it. They no longer have to deal with technicalities.

[davis196]

I don’t understand why people keep wanting a SBR. We don’t need that. Especially if a future president or Congress can dump it at anytime in the future.

A future president or Congress can dump FDIC insurance as well. Anyway, your idea won't happen in real life, so there's no point discussing this.
I don't get the people, who are like "let's put our BTC in banks and let's make the government guarantee those BTC". Wasn't Bitcoin supposed to be anti-bank and anti-authority? You are basically the same as the Strategic BTC Reserve supporters, who want the US government to buy BTC and pump the Bitcoin price. FDIC insurance can bring trust and stability in the crypto markets, but what happens when banks start going bankrupt? The US government can't pay trillions of dollars in FDIC insurances. The Federal Reserve will have to print trillions of USD and solve the problem.

[Despairo]

A future president or Congress can dump FDIC insurance as well. Anyway, your idea won't happen in real life, so there's no point discussing this.
I don't get the people, who are like "let's put our BTC in banks and let's make the government guarantee those BTC". Wasn't Bitcoin supposed to be anti-bank and anti-authority? You are basically the same as the Strategic BTC Reserve supporters, who want the US government to buy BTC and pump the Bitcoin price. FDIC insurance can bring trust and stability in the crypto markets, but what happens when banks start going bankrupt? The US government can't pay trillions of dollars in FDIC insurances. The Federal Reserve will have to print trillions of USD and solve the problem.

It might happen, but the name is SIPC not FDIC which has been mentioned by above user.

Such insurance can be a big reason why people choose them over other ways, just like Binance who offer SAFU and staking feature, many people choose Binance over other centralized exchanges including non custodial wallet because they think they investment would be safe and more profitable.

As time goes, Bitcoin getting far away with it's purpose and utilities.

First, in the past people are discussing we should hold our coins in non custodial wallet over centralized exchange.
Then, people are discussing Bitcoin should be used as a currency instead of investment.
Now, people are support if government want to take over Bitcoin.

[Lucius]

~snip~
Many people who are interested in Bitcoin but cannot easily grasp the technical implications of self-custody, or are afraid to commit as their own bank, are likely to set aside the idea. But if the banks offer insurance to their Bitcoin savings, they will now be encouraged to get into it. They no longer have to deal with technicalities.

Those who are not ready to be their own bank should have nothing to do with BTC, and least of all trust that banks will give them the opportunity to secure their investment in Bitcoin. Technically speaking, any person with an average IQ can acquire sufficient knowledge about secure storage and how to make and receive transactions in BTC in a very short period of time.

Instead of teaching people to accept BTC with the features that make it unique, some are looking forward to it being equated to a fiat deposit in their bank account. I always say "be careful what you wish for, because it might happen".

[OgNasty]

The thing is...  The general public doesn't care about insuring Bitcoin.  They don't want to hold Bitcoin.  They want to buy it, get the government to pump it, then sell it and make a profit.  That makes the path to a strategic reserve much easier than the path to get the government to provide insurance.  Not to mention what a headache that would be.  Imagine people setting up fake hacks or claiming they lost their keys to cash in on the FDIC.  It does seem like they're working on it though and are starting with the banks, who seemingly will be taking deposits and paying interest in the near future.