Earlier quoted context omitted.
This was a failure of traditional financial institutions and people who are ok with them, not of crypto. Satoshi wouldn't be encouraging people to put their coins on a trusted third party like that. All fundamental crypto values say this.
Precisely the failure of crypto is thinking that people will follow "fundamental crypto values" and underestimating the power of convenience and ignorance. "Traditional financial institutions" are inevitable in crypto.
In a fixed money supply currency, fractional reserve banking should be illegal and banks should instead make money off fees. Venture capital should put their own money at risk to invest in the economy. How will people afford houses though? The housing market booms and busts because of the wildly fluctuating availability of credit caused by the money multiplier rapidly creating and destroying money which is tied to the fractional reserve banking concept. Homes would be drastically cheaper and people would actually be able to save to buy them if it weren't for the huge supply of rapidly created and later contracting credit available to buy them. Things we buy with credit like housing and education have gone up steadily in price, while things bought with cash have not.
The fractional reserve people are so sick of crypto, that ,in one platform, you can buy bitcoin but you can't send it to a crypto address. You have to get your friend on the platform, you can send it to them, and then they can convert it back into fiat. It's ridiculous, you're basically just buying and selling a security that tracks Bitcoin and not Bitcoin itself.