Is that true? Wouldn’t holding the bitcoin itself satisfactory?

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Probably depends on how it is insured. If it is FDIC then no. I agree, there really shouldn't be an issue. But in a world where dollars are expected it is still difficult.

Dollar banking is still by far the dominant form. That won't change quickly.

Gotcha. I don’t think banks should bank bitcoin. They can get in to a new business of custodianship.

There will be a range of different models which are tried. Just not quite yet, although we are getting closer.

That *was* the rule. Now they don’t *also* need to hold that $1M USD.