> Is that like just letting every Bernie Madoff's scam run its course -- eventually retail investors and retirement funds will learn to stop investing in scams?
Madoff was a scammer operating in a well regulated traditional financial space, where legitimate investment funds exist.
The authors here propose segregating crypto from traditional finance by forbidding fiat fiduciaries to invest in crypto at all. Basically, recognize that most of the crypto is zero sum speculative game that has no legitimate investments, just like banks today are forbidden from purchasing lottery tickets with their depositors' money.