Regulating Exchanges only poses one advantage to the government which is the tax and that is not entirely bad. But the government regulating an exchange will somehow defeat the purpose of total decentralization of cryptocurrency. The government will definitely argue that they are after the citizen’s protection, I still think they just want to monitor people holdings because even banks that regulated the government still aren’t able to control the crimes or scams there. Moreover some countries government have made it clear that cryptocurrency is volatile and somewhat a Ponzi scheme, so I ask will this regulation make it less volatile?.

Just like others Exchanges mostly centralized ones that wants offer direct bank transfers should be regulated since they are involved in taking benefits from people like fees they charge but I wouldn’t advice any to keep there funds on them because it is regulated and the government feels they are secured after registering with them. FTX seems registered and yet they still got in a saga and people the government claim they protect are yet to recover there funds