Current regulations allow "regulatory self-custody", but will never accept centralized entities to not submit to possible new regulations.
Discussion
Trustless systems may still be centralized, but generally can decentralize later. Trusted parties cannot.
Where to next?
Bar has shifted, Lightning self-custodial is not competing with on-chain anymore, but with new solutions that have better UX and nearly-0 fees.
Users will not settle for "better than on-chain" wallets anymore.
"Bitcoin simply doesn't work unless there is sufficient demand for censorship-resistant transactions in the world"