Similar to how stock certificates or bond coupons originally could be held in self custody. An owner will always have to trust the issuer not to renege the agreement but that’s a distinctly different problem than self custody.

KYC is a relatively new rule that has been introduced into financial markets. Prior to the late 80s there was no KYC needed to buy and sell securities. Arguably this is still true today for all the securities created on other blockchains that do not require KYC. It remains to be seen as to whether these will receive an type of enforcement action, but that’s separate from financial assets have to be part of a KYC regime.

I agree money is different than financial assets, but that doesn’t mean there isn’t value in having a similar way to custody and transact. The biggest difference will always be trust. Bitcoin proves you don’t have to introduce trust for money, while there will fundamentally always be trust for financial assets. RGB isn’t trying to make contracts trustless so I see it as a totally valid project to attempt to bring useful functionality to bitcoin that will help fulfill its role as money in the future.