Well, one issue is it’s pretty hard to make money being a responsible custodian of cash, electronic or otherwise. It fundamentally doesn’t earn interest just sitting there, it’s a tempting target for thieves so you have to go through a lot of effort to protect it, etc. that’s true even if you’re just an exchange, and you only hold it for a day.

It’s a lot easier to make a lot of money if you steal it, or play games. Most of those are already illegal, no regulators required.

Regulation can help of course, if someone actually comes by and checks that nothing illegal going on. but the type of regulation that comes along with ‘have a reliable audit of what you’ve got every night, or else’ also tends to include ‘and make sure you don’t do business with drug lords and human traffickers’, at least in the West.

God help you if you try to fight that last one too.