Because of bitcoin's origins in a largely an-cap community - and the continual anti-Government, pro-capitalist mindset in a significant part of the community as it stands now - there's not actually as much demand as there should be for "legal" exchanges etc. As a result, there's much more competition in the "shady" exchange space, less competition in the "legal" exchange space, and two things result: people occasionally lose a significant chunk of their life savings to shady exchanges, and legal exchanges don't have as much of a drive to be technically brilliant.

That's pretty insightful, actually. I mean, outside of Kraken (terrible), who are Coinbase's (legal/compliant) competitors? Basically no one.

This has nothing to do with compliance/legality. It has to do with engineering.