This should be a cautionary tale to people who dream about society without government and its regulations. Imagine if someone makes an "experimental and innovative" nuclear reactor that explodes and gives radiation sickness + cancer to hundreds of thousands. Or someone makes an "experimental and innovative" dam that collapses and floods houses. Invisible hand of the market won't be able to undo the damage or prevent it in the future from repeating again.
I think most people are fine with regulations as long as it is reasonable. The problem is that the one who runs the system can't be trusted, which is hard to solve since you can't simply tell everyone to "try to participate in governance then".
If this point is being connected with cryptocurrencies, such as exchange and whatnot, the problem is not really similar since the stakes are different. As far as I'm aware, nobody died when they don't submit KYC and don't want to do it, just facing some inconveniences. If we really want to force the invisible hand term into this discussion, then some might argue that the stock price of such a company can get slashed if the public found out that the CEO and its staff are a bunch of idiots. CMIIW.
A lot of cases related to exchange insolvency also give us some distrust in how people run these exchanges, or how the government handles the case. The debate about SEC being so unclear with their rules and how they go after exchanges is quite popular on social media afaik.
Hopefully, nothing like this will happen in the future.