Developers on Steam can ship their own update mechanism separate from Steam if they want to.
I feel like people don't actually know the policies of Steam and how it mostly just leaves it up to the developer, for better or worse.
If Steam decided to block developers from being able to do DRM, it wouldn't mean all the games would go DRM free, it'd mean the games wouldn't go on Steam, like they don't go on GOG - they'd go to their own launchers.
As much as people like to believe Steam has a monopoly, publishers have been able to bring out their own launchers reasonably successfully. People will go to their launchers if that's the only way to get anticipated games. Some of the most successful games started and remained outside of Steam.
The industry would look significantly different if Steam had an actual monopoly.