This is because blockchains have no way of enforcing laws, including property rights. Therefore it comes down to this. Imagine that whoever got hold of your car keys, automatically became the owner. This is what "not your keys, not your coins" means.
The "not your keys, not your coins" is more the fact that someone else holding your stuff happen to them and your stuff goes away. Or they never had it to start with. i.e. Counterparty risk.
`Cash` doesn't inherently have any mechanism for enforcing rights either. The difference is that real-world identities are easier to establish in situations where cash transactions go awry.
Common mistake. The original saying was "Possession is nine points of the law". Over time it's been bastardized to "nine-tenths".
If people want a system where this as well as excessive inflation are close to impossible, they now have an option, with the clear caveat of that ownership.
It’s not like there aren’t other options to choose - custodial services and multi-signature wallets. Banks are custodial services too, and that’s fine.
Fraud. Transaction rollbacks. Consumer protection laws.
A much smaller fraction should be using open source and audited hardware wallets as well as offline paper wallets.
People will have the option to shoot their foot off with real, direct control, yes. That option or ‘genie’ doesn’t go back in the bottle, not permanently.