It is possible that an exchange will not be granted a license if issues are not resolved. We must normalize it since the authorities are solely concerned with for the sake of investors in their country. There have been numerous reports of investors being hacked or defrauded, and it keeps happening.
Besides, investors are also feel safe if the exchange is regulated and licensed. So, in those exchanges, they need really take care of their reputation so that their project may continue to work and grow in most countries.
I believe that regulations would increase the trust of investors to some extent. And true to what you say, exchanges that wants to keep operating in some regulated regions needs to comply before they can get their license and if not, they won't be allowed to operate.