The banking side is becoming more mature, I think, as many exchanges like Coinbase provide custodial cold-storage options for institutional clients.
Counter-party risk always exist.
> Then there are the horror stories of banks freezing your account when you move funds in and out of exchanges.
Depends on the country. What happened to me is that a bank did not freeze my account. Instead, they simply reported it to the government, and asked AML questions regarding the transfer. The government, on the other hand, wanted me to provide bookkeeping records. Otherwise, they were going to assume that every transfer coming back from cryptocurrency exchange was pure profit.
Basically, I was not raided, my accounts were not frozen, but the government knows my wallet addresses (and I had to pay back 4 years worth of cryptocurrency trading profits with interest applied, which also left me realize how little I had made profit in the end).
Extra warning: ensure your country allows individual cryptocurrency investors to reduct losses from winnings. Without such law, if you win 100 dollars and then lose 100 dollars, you would still owe the government taxes while you are at 0. This is the case in surprisingly many countries.
There was a "fun" post on reddit with someone that made a fortune out of bitcoins a few years ago when there was that big surge, who then managed to lose it all via some poorly thought out cryptocurrency trading. He'd found himself with an enormous capital gains tax bill he couldn't pay off. It hadn't occurred to him at all that the profits on bitcoin trading would be taxable.
Counter-party risk always exist.
> Then there are the horror stories of banks freezing your account when you move funds in and out of exchanges.
Depends on the country. What happened to me is that a bank did not freeze my account. Instead, they simply reported it to the government, and asked AML questions regarding the transfer. The government, on the other hand, wanted me to provide bookkeeping records. Otherwise, they were going to assume that every transfer coming back from cryptocurrency exchange was pure profit.
Basically, I was not raided, my accounts were not frozen, but the government knows my wallet addresses (and I had to pay back 4 years worth of cryptocurrency trading profits with interest applied, which also left me realize how little I had made profit in the end).