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> I'm wondering if my local credit union wants to hold my BTC for me, if I wanted to do something like that.

They'll do that now with a piece of paper in a safe deposit box, no? Other options for their holding your BTC, including ones that let them make money off it and so offer interest to depositors, seem like they'd open up the same risks as existing relatively-reputable exchanges.

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A piece of paper in a safe deposit box is, unfortunately, not risk-free. There have been some incidents where, for example, the owner of box #1343 loses his key and asks the bank to drill the box, so they drill box #1434 and give him the contents (hopefully your paper wallet does not say "MILLIONS OF DOLLARS IN UNTRACEABLE EASY-TO-STEAL CRYPTO" at the top!) Also, floods have resulted in box contents being destroyed (a bigger problem in some cities than others.)

Not to mention most safe deposit boxes are insured for a few hundred dollars max unless you've specifically bought additional insurance. So if the bank does screw up and give your box contents to someone else, you can only recover a very minimal amount of the value.

At that point you might as well buy insurance directly and skip a step

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