It would be great from a rehypothecation and custody standpoint but I don't see it happening, its big business to trade partially backed sql database entries at high speed and I don't think that's going away anytime soon.

If it were, we would see things like USDT/L-BTC pools on Liquid or something be far more popular and people would just trade on-chain, but hopefully a few more ruggings and a few improvements to DEXs and AMMS and we can move some of that market share away from CEX/VEXs