I'm pretty sure the Federal Deposit Insurance Corporation doesn't cover crypto. I know what you mean but even with the more reputable players like Coinbase of Kracken I'm a bit wary of the oops we got hacked / shut down / we can't give to you due to AML type stuff.
The third, an exchange, violates all the core principals of cryptocurrency and is basically no different than what we have today but way harder and less efficient. Exchanges don’t require crypto they just run a MySQL store and attribute fractional ownership as centralized, opaque records not protected by the blockchain. If everyone just did that because it’s the simplest and easiest and most secure way to hold on to your coins, cryptocurrency would just replace bank to bank transfers which by definition don’t require a trustless backing and all the worlds electricity.
Plus to quote your fellow converts “not your keys, not your coins.”
That being said, there are number of ways you can store your crypto-currency, with varying degrees of trust-minimization:
- Use a multi-signature smart contract wallet, where a master key has power to move the money. If the master key is lost, the money can be moved by X out of Y keys signing off on the transaction. You can then distribute the Y keys to your trusted associates, preferably without telling them who the other key-holders are.
- Use a dead-hand smart contract wallet, where the money can be retrieved by a trusted associate, if the dead-hand switch hasn't been activated within Z amount of time. Can be combined with the above, in case further trust minimization is needed.
- Store your crypto-currency at a FDIC exchange. Pretty much the same model as the banking world. This really should be the go to way for the average Joe, as it mirrors what you currently can expect from online-banking.