Plus, because they regulate the fee market, they could manipulate miner incentives. Like incentivicing them to ignore certain chains over other with more fees. This is really dangerous
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This may be a limit in my understanding, but I don't get what ya'll mean. The miner incentives should be the same as today, the payout will just be tiny, which might still be a lot of value if Bitcoin gets extremely valuable over the next 100 years. Shouldn't matter what the custodians or whoever are doing, miners will be taking transactions and offering the highest fees. Us plebs will still have nodes, and will be watching. On chain Bitcoin will just be far too expensive to use for anything other than huge sums, everyone will be down in the layers.
If those (not many) middlemen are the only ones using Bitcoin, then they can easily be targeted and corrupted. It also means that in combination with centralized mining, it is easier to take away the decision making about which chain to ignore or not.
Especially with those big big players who try to have control over everything.