you trust custodians not to issue too many IOUs for absolutely no reason, even though they have done it and been caught an uncountable times already, and custodians also did the same thing to precious metals.

WHY does bitcoin protect anyone from anything? because it's supposed to let you bypass a financial institution. if almost all of the users don't want to do that or cannot do it, it is the same as speedrunning what happened to the gold standard. this can only be avoided IF a network upgrade enables scalable self-custody and enough of the userbase takes advantage of it.