This was in the days when light wallets were non-existent or in very early stages, so user experience was far from great. Even things like seed phrases didn't exist back then, so you had to back up your wallet file, and if you happened to receive coins, you had to backup again, if a wallet wasn't deterministic. So, at that time, using custodial wallet greatly simplified user experience. These days, it's not the case, except maybe for Lightning, where custodial wallets are again a bit simpler to use, and it's not such big of a risk if you deal with pocket money.