It's another case of where "security" means keeping your computer secure from you. And the password stealer argument is just stupid: by the time EAC kicks in, your password is already stolen.
"Every month, thousands of users have their accounts stolen, often due to running a modified client that is silently logging their keystrokes as well as other information. These users – often without even realizing it! – run the risk of losing their account, or having their computers become part of a larger botnet."
People running a backdoor client and getting their passwords stolen? That doesn't sound... wrong?
I think there's a case to be made that VRChat allowing mods in a safe way is possible, if they wanted to do it. But they clearly don't see value in that. I hope they're proven wrong soon.