Most trusted exchanges have some kind of insurance in place [1][2][3].

1: https://support.gemini.com/hc/en-us/articles/205823016-Are-m...

2: https://help.coinbase.com/en/coinbase/other-topics/legal-pol...

3: https://www.coindesk.com/bitgo-600m-insurance-capacity-big-t...

None of these are as good as the protection of your money in a bank. e.g. Coinbase's insurance covers just their 'hot storage', but that's only 2% of your currency. Plenty of exchanges have lost their supposedly secure cold wallets to hackers.

Coinbase is so large that if their cold storage was compromised, the ripple effects on the entire crypto market would destroy immense value everywhere.

Returning coins to users would only be part of the problem. Everyone’s coins would be worth less from the fallout alone.

So what does using a “bank+crypto” offer over just using a bank?

You can actually opt out of using a cryptocurrency bank.

being a part of a financial pyramid

What does that even mean? Cryptocurrencies are currencies; there’s nothing fundamentally different about holding them for investment purposes vs. doing regular ForEx trading, save for the fact that the existing ForEx infrastructure hasn’t caught up to support crypto yet.

Most people don’t hold currency as an investment, they hold it so that they can spend it on things.

That's why I said ForEx. People don't tend to hold their own currency as an investment (except in the form of treasury bonds); but they do tend to hold (a portfolio of) currencies other than their own — or bonds from the governments that issue those currencies — for investment purposes.

The exact kind of trading that crypto people already do all day, is called ForEx trading when applied to fiat currencies; and (investment) banks know how to do it very well. Those banks just haven't built the infrastructure to allow them to manage a BTC or ETH holding through the same ForEx account that they use to manage fiat holdings.

If they did build that infrastructure, most of the crypto exchanges would go extinct overnight. Why would I do my (crypto) ForEx trading on a crypto exchange, if I could trade it with my bank instead?

(There are benefits to using a DEX over a hypothetical crypto-enabled investment bank for crypto-trading; just no real benefits to using a regular centralized exchange over said bank. Centralized exchanges are investment banks — just fly-by-night ones compared to real investment banks.)