If they take BTC out of circulation to use solely as bank collateral to back dollars, I'm not sure those of us with self custodied coins need to care, any more than we particularly care about coins locked up in wallets that ended up orphaned because they weren't properly backed up. Worst case scenario, their increased demand and the diminished supply may mean BTC's price gets high enough we have to seriously consider whether the satoshi really is the smallest unit of Bitcoin. The most insane valuation projection I've seen was $1 Billion USD BTC before 2040; at that price we'd really probably want to consider sub-satoshi units in order to facilitate microtransactions that really aren't even so micro anymore. Assuming of course that billion dollar valuation isn't simply because a cart of groceries costs $10,000...

That's how I see it anyway; is there an angle you see I'm missing?