Digital currency is growing up fast.

Just a few years ago, Bitcoin and other cryptocurrencies were in their geeky preadolescent phase: lots of potential, not much social cachet. But at the Inside Bitcoins conference in New York this April, the industry was abuzz with the possibilities and challenges involved in forging partnerships with banks.

In the past year, cryptocurrency technology has attracted interest from the Federal Reserve and traditional financial institutions as a means of speeding up payments and cutting costs. High-profile Washington and Wall Street alumni like former Federal Deposit Insurance Corp. head Sheila Bair and former Citigroup chief Vikram Pandit have lent the industry further credibility by backing Bitcoin firms itBit and Coinbase.

Yet cryptocurrency's reputation continues to be tainted by such unsavory episodes as the failure of the Bitcoin exchange Mt. Gox and the government bust of online black market Silk Road. Most banks remain reluctant to take on digital currency clients and industry advocates say their biggest challenge is changing the perception that cryptocurrency's anonymity makes it a breeding ground for criminal activities.

"Fundamentally, we're trying to get people to come to the dance with us, and that's hard to do when people don't trust you and are concerned you might be involved with criminal activity or otherwise nefarious engagements," said Sarah Martin, chief executive of digital currency public affairs firm Boone Martin. The industry's relative immaturity has been a major factor in its past troubles, said panelist Ted Rogers, who serves as chief strategy officer of Bitcoin wallet provider Xapo.

While Silicon Valley investors generally accept the potential for failure as the cost of innovation, digital currency firms face different standards.

"The Silicon Valley ethos is that you can fail and integrate failure," said Rogers. "That doesn't work in financial services. You're dealing with people's money, so you have to get it right from the very beginning."

Panelists generally agreed that if cryptocurrency firms want to prove their maturity and gain popular acceptance, they'll have to submit to government oversight. "In order to forge any kind of commercial partnerships and bring products to consumers, we need regulation," said Constance Choi, a lawyer and founder of digital currency consultancy Seven Advisory.

For now, Bitcoin firms in search of banking relationships can take steps to create a culture of compliance, said Neal Reiter, senior product manager at IdentityMind Global. He suggested that startups work with attorneys and other experts to develop compliance plans that meet anti-money-laundering and other regulatory standards and to establish independent risk assessment systems.

"There are definitely things that you can do as a Bitcoin firm to make yourself more attractive to financial institutions, but it's not a quid pro quo that you get a banking relationship," he said. He compared the industry to a junior high student boogying solo while others watch with a mixture of intrigue and apprehension. "We hope that as time goes on, we'll see more people dancing."