We know, the Fed will step in at any time to back stop the losses. Don't kid yourself into thinking that such a system is without systemic risks. There's a reason why the big wigs spend their time in Davos dreaming and scheming about The Great and Orderly Reset.

As for KYC, crypto is well aware of it. Any centralized exchange you deal with in US has it in place already.

As for fraud protection and chargebacks, that is really just an insurance problem. And that's got solutions in the works.