Right, because the network is so small and non existent no one wants to use crypto. So what happens when the decentralized version of things becomes easier to use than the centralized counterpart? You are not accounting for this.

Fractional reserve Bitcoin makes sense in the context of one exchange not being truthful about how much Bitcoin they have (which I doubt Coinbase is doing at the moment). It does not make sense in the context of a connected web of exchanges. No exchange is going to allow fake Bitcoin to be transferred to them.

To assume that we could somehow end up with the same system seems a bit alarmist at best. It's no secret you can loan the same money 10 times in a row with fractional reserve banking. It would be a huge secret in the context of Bitcoin. One that would cause big investors to exit and exchange and immediately make it insolvent.

This is where your idea comes in to make this action illegal. Making it illegal to transfer Bitcoin is just going to make users even more nervous and find even more innovative ways to exit the exchange in question... which would be easy because US law is only going to affect US exchanges.

This is not a problem we need to be worrying about for another 20-30 years.
By that time the landscape will be completely different.
Unrecognizable from where we are today.