Currently crypto is too free to make it easy for anyone to make coins or tokens, unfortunately because it is too easy to make tokens or coins it is widely used for scam projects, strict regulation is needed to ensure that projects are not used for criminal acts.
Correct, this is the effect of lack of regulatory bodies. Many new investors get washed away by such projects and this hurts the overall economy of cryptocurrency because that person is not coming back anytime soon. Consider that new money coming in to bitcoin and we would get the gradual organic growth.
Of course altcoin hodlers will speak the opposite, they want their bags to get heavier so they can dump on a unsuspecting newbie on an exchange.
I think like an investor, it's our responsibility to carefully evaluate the project before we invest, authorities should only come later if the team who runs the public sale messed up or scam the investors.
I agree that as investors we should do due diligence but does that second part of your statement really come into action? The number of scam or bankrupt projects that have come up after the post 2016 ICO craze, very few have been brought to legal light even if each and every one of those investor groups proceeded with legal action.
Currently the legal status is a difficult topic but I would agree that this too needs addressing.