And since this is something that could happen off the network there is nothing protecting bitcoin for something like this happening, the only difference is that the bitcoin network will keep on existing, so those which do not fall for this gambit will still be able to use their bitcoin as they want, but almost all bitcoin deposited on banks will never see the light of the day again as just an additional step is needed to make all those certificates fiat money by suspending your ability to exchange them for bitcoin.
We already see places like Robinhood and PayPal allowing users to purchase "bitcoin", except the only thing they can do with that bitcoin is hold it and then sell it back to the platform in question, meaning there is absolutely no way for the user to know whether or not the platform is actually holding any bitcoin or just giving them price exposure. It won't be long before there is an entire sector of people paying each other on one of these platforms or maybe an exchange such as Coinbase, sending "bitcoin" from their centralized account to a merchant's centralized account, without ever making an onchain transaction and without ever knowing if the bitcoin in question actually exists.
Crypto assets have always lacked that support infrastructure which has always prevented it from penetrating home, auto, personal and business loan markets. All of which are dominated by fractional reserve institutions.
And as more and more people sign up to centralized exchanges and hand over all their personal information, including things like employment status and yearly income which exchanges are now asking for, then crypto exchanges will have access to all the same information that fiat banks have access to. I won't be surprised when we start seeing crypto exchanges performing credit checks on their customers before offering them services.